It’s no conspiracy theory that mega-corporations benefit from dodging taxes and that there are a bevy of legal loopholes accountants use to ensure businesses lose as little money as possible to the government.
Few of these loopholes sound as nefarious as shuffling money into offshore accounts in the Cayman Islands or Bermuda or Luxembourg – probably because these tax havens illicit images of mustache-twirrling Hollywood villains.
But offshore accounts aren’t just the domain of fictional criminal masterminds. These tax loopholes are a big part of big business, and they’re legal. Now, they’re coming under fire because they keep corporate money away from public services.
The Colorado Public Interest Research Group this week released a study about tax loopholes. The report shows that 72 percent of Fortune 500 companies used tax havens in 2014. It highlights three Colorado companies – Western Union, Level Three Communications and Arrow Electronics.
According to the report, Level Three has 28 tax-haven subsidiaries and does not track how much money goes toward them. Western Union has 44 subsidiaries and reports $7.5 billion booked in tax havens, and Arrow Electronics has 51 tax-haven subsidiaries and reports having $2.9 billion booked.
“When corporations dodge their taxes, the public ends up paying,” said Robert Nowell of the CoPIRG Education Fund in a statement.
For these companies, the explanation for these off-shore accounts is simple – these businesses’ work is international in scope and not beholden to one nation’s tax code.
“As disclosed in our 10-K in Section 8, $2.9 billion is Arrow’s cumulative earnings of international subsidiaries,” wrote Arrow’s spokesperson Meghan MacDonald in an email to The Colorado Independent. “It’s important to note that 54 percent, or $12.3 billion, of Arrow’s 2014 sales were derived outside the United States in 2014 alone. These cumulative earnings are not stockpiled cash—they have been generated over many years, have been permanently reinvested in the company’s international operations, and are not available for repatriation or any other purpose.”
Macdonald said CoPIRG and the report fail to delineate between companies funding large international operations and those that are taking advantage of the tax code and primarily doing business in the United States.
“Arrow maintains over 300 sales facilities and 40 distribution and value-added centers in 56 countries, and we serve over 100,000 customers in over 85 countries around the world. Each year, we must make substantial investments in inventory and capital expenditures to maintain and grow our international businesses.”
As for Western Union, “The Company and its subsidiaries file tax returns for the United States, for multiple states and localities, and for various non-United States jurisdictions, and the Company has identified the United States as its major tax jurisdiction, as the income tax imposed by any one foreign country is not material to the Company,” wrote Vice President of Global Communications Daniel Diaz.
For CoPIRG, there is nothing immaterial about where income taxes go.
“The American multinationals that take advantage of tax havens use Colorado roads, benefit from our education system and large consumer market, and enjoy the security we have here, but are ultimately taking a free ride at the expense of other taxpayers.”
CoPIRG identified several other companies as “Colorado’s biggest tax dodgers.” These include: DaVita, Ball, CH2MHill, Liberty Interactive, and Newmont Mining.
Level Three did not respond to The Independent’s messages.
Read the full report here.
Photo credit: John Goodridge, Creative Commons, Flickr.