The Panama Papers gave a glimpse of how the wealthiest people hide their money overseas. Broken at the Top, an Oxfam America report tells the story of America's dysfunctional tax system that is costing the most powerful country in the world billions of dollars yearly.
The Oxfam report reveals that the 50 largest U.S. corporations stashed a staggering $1.4 trillion dollars in tax havens outside the American border. This means a loss by the government of an estimated $111 billion in yearly tax revenue that "could have helped lift 60 percent of poor kids in the U.S. out of poverty and created an additional 620,000 jobs rebuilding America's crumbling infrastructure."
U.S. technology giant Apple tops the list with $181.1 billion, General Electric second with $119 billion and Microsoft third with $108.3 billion. IBM, Merck, Johnson & Johnson, Cisco Systems, Exxon Mobil, Alphabet (Google's parent company) and Citigroup complete the top ten list.
The Oxfam methodology consisted of analyzing data from publicly available sources like the corporations' annual 10-K SEC filings and company disclosures on profits, federal loans, loan guarantees and bailouts received, federal and state taxes paid, global taxes paid, effective tax rate, tax incentives, offshore investments, subsidiaries and federal lobbying expenditures. The analysis covered the period 2008 to 2014.
Hiding Behind Subsidiaries To Avoid Taxes
A major weakness of the disclosure system is that U.S. laws do not require complete disclosure of all subsidiaries. SEC only requires corporations to disclose what they deem "significant subsidiaries". Subsidiaries that require disclosure are those where either the company's investment in the subsidiary is more than 10 percent of the company's total consolidated assets, or the company's income from the subsidiary exceeds 10 percent of the company's total consolidated income.
The trillion-dollar estimate that comes from 1,608 subsidiaries may just be the tip of the iceberg. It could be a conservative estimate, said Oxfam America campaign director Judy Beals in a press call last week. She described the volume of the offshore investments of the corporations as "astonishing", with these corporations being the largest beneficiaries of tax breaks and taxpayer money support.
The report also shows that the collective profits of the 50 corporations amounted to $4 trillion and yet paid taxes at a lower average rate of 26.5 percent instead of the mandatory 35 percent. This is a clear case of tax dodging and these striking statistics are just part of the "evidence that today we live in a world with dangerous and growing levels of inequality."
"Tax havens, in our view, are at the heart of a rigged global system that allows large corporations to avoid paying their fair share. The global tax system is fundamentally broken and harming the U.S and poor countries alike," Oxfam America President Ray Offenheiser said during the call.
The Panama scandal has opened a can of worms, with corporate greed rearing its ugly head.
As the rich become richer and fewer, and the poor become poorer and larger in number, how can the U.S. government and other governments worldwide, including those of Panama, Bermuda, the Cayman Islands and the British Virgin Islands help narrow the gap?
Let's start the conversation.
Photo: Brian Donovan | Flickr
