U.S. companies have $2.1 trillion worth of profit stored overseas
The U.S. Congress must find a way to tax offshore profits stored by some of the world’s largest corporations. Currently letting their earnings safely mount up abroad, lawmakers are considering a special “deluxe” tax rate to get money from the companies.
A recent study from the Center for Effective Government and Institute for Policy Studies found that just 26 corporations had stockpiled $2.1 trillion alone in storage abroad. It enables companies to dramatically reduce their tax bill within the US.
The company with the most money stashed abroad is Apple. The technology giant had $157.8 billion stored overseas last year. The taxes due on this sum are around $45 billion according to the authors of the report.
Congress has to avoid a repeat of the 2004 tax break though. 843 massive companies were given an 85 percent discount on “repatriated” offshore profits, enabling them to reduce their tax bills by around $100 billion.
The legislators believed that the move would cause the firms to use the repatriated funds for good, creating jobs in the US and fuelling investment. Instead, in many cases the money went to high-ranking executives and shareholders.
Pending bills in the US now could result in a replica of the 2004 events though, argues The Epoch Times. President Barack Obama has proposed his own solution in the form of a 19% tax on all offshore profits and an additional 14% tax on the current $2.1 trillion stash but this is a dramatic reduction on the ordinary 35% corporate tax – a heavy incentive to companies to continue to store profits abroad.
Offshore company formation is also very easy to achieve currently. Many multinational companies are based in tax havens such as Switzerland and Luxembourg. The practice enables them to keep the vast majority of the profits that they earn while paying a token sum to the US government.
A proposal by lawmakers to end the practice would close several loopholes and raise $278 billion across the next 10 years. Called the Stop Tax Haven Abuse Act, the sum is still trivial in comparison with the $2.1 trillion hidden away abroad though.
The government requires the money to upgrade America’s infrastructure with. $3.6 trillion is required by 2020 to upgrade the roads, transit networks, cities and schools, according to the American Society of Civil Engineers.
This target could be met more easily if the giant corporations were made to pay more tax. The benefits would be felt by the entire US population but the companies involved are of course eager to make as much money as possible.
