01.29.13
Taxavoidinations for … ‘profit shifting’
Proven by science, or at least by the Congressional Research Office, the legislative analytical arm looks into ‘profit shifting’ by American multi-national corporations. Profit-shifting is the practice of using global tricks to declare the majority of profits in tax haven countries while investing virtually zero in hiring and infrastructure in the same places.
This is the utilization of small nothing-nations like Bermuda, Luxembourg and Switzerland, to launder profit so that tax payment to Uncle Sam are avoided. In such a way one has read news of US oil giants with central shell offices in Zug, Switzerland, or Apple routing its iTunes and iJunk store purchases through Luxembourg.
This is not new and the Congressional Research Service does not phrase it so indelicately. But it is good that the agency has analyzed the trend — which is upward — and reported the truth in “An Analysis of Where American Companies Report Profits: Indications of Profit-Shifting,” ably distributed by Steven Aftergood and his Secrecy blog here.
“The analysis appears to show that American companies report earning profits in tax haven or tax-preferred countries that, when compared to more traditional economies, appear to be disproportionate to hiring and capital investment in those countries,” reads the CRS report summary. “Profits reported by American companies also appear to be disproportionate to national output in the tax haven countries, and in some countries, these reported profits actually exceed total economic output.”
In other words, the financial structures of Bermuda, Luxembourg, the Netherlands, Ireland, Switzerland and others appear to have been modified and used exactly because they enable tax avoidance as international parasite nations.
Again, “An Analysis of Where American Companies Report Profits: Indications of Profit-Shifting,” at Secrecy blog here.
Mike Ozanne said,
February 5, 2013 at 4:52 am
we’ve had the same issue here(UK) with the likes of google and starbucks. One of the dodges is a new one, renting corporate IP from a division in Notaxistan. But funnily a lot of it is the good old transfer-pricing scam which we actually have regulations against (interco pricing has to be commercially viable) but for some reason HMRC have neglected to enforce. Interco loans and management fees remain a festering sore. I’d advocate code changes to force the interco loan to be replaced by a local bank arrangement unless the APR was lower. And also banning any management fee payments (meant to be for excellence and skill after all) if the local company posts a loss if it is included (no profit = no skill…)
George Smith said,
February 5, 2013 at 10:43 am
Sounds reasonable. We should have it here. Before the election giant corporate America was lobbying for yet another tax amnesty. They all sided with the other guy. Since they lost the current administration may not feel obligated to play ball with them now.