A recent study made by the Citizens for Tax Justice (CTJ) and the U.S. Public Interest Research Group Education Fund revealed that Fortune 500 companies are keeping over $2.1 trillion in profit in their overseas subsidiaries in 2014.
Among these companies, it is Apple that tops the list with its $181 billion worth of earned profits stashed overseas.
The study noted that should Apple bring back its billion-worth of profits to the U.S., it would mean that the company would have to pay over $59 billion in taxes. According to the study, Apple currently has a trio of tax-haven subsidiaries overseas.
CTJ defines the term "tax haven" according to its four distinct features. The first one defines it as a jurisdiction with very low or nonexistent taxes. The second refers to it as the existence of laws that encourage financial secrecy and inhibit an effective exchange of information pertaining to taxpayers to tax and law enforcement officials. The third describes it as a general lack of transparency in administrative, legal or legislative practices. Lastly, the fourth discusses its apparent lack of a requirement that activities be "substantial," suggesting that a jurisdiction is attempting to earn fees in modest amount by tolerating tax avoidance.
"Multinational corporations' use of tax havens allows them to avoid an estimated $90 billion in federal income taxes each year," concluded CTJ.
Neil Buchanan, a tax law professor at George Washington University, expressed that these offshore accounts, being untapped revenue source, have the potential to bring significant benefit to the U.S.
"Losing $90 billion of potential tax revenues every year is a big deal," said Buchanan. "That money could be used to reverse recent cuts in Head Start, and/or assistance to state governments to fund education at all levels, or increase the Earned Income Tax Credit, and on and on. Politicians who respond to proposals to fund these programs by saying that 'we can't afford it' are simply saying, 'I'd rather cut Apple's tax bill than educate our children."
In July, Apple disclosed that it had a total of $203 billion in cash which is the first time that the company broke its $200 billion mark.
At a Senate hearing in 2013, Apple CEO Tim Cook testified about the company's alleged tax avoidance. That time, the company was said to have $102 billion stashed in overseas accounts.
Cook explained that the company holds a great amount of cash in overseas accounts because of its global growth. Another purpose for doing such practice, added Cook, is to allow them to fund their international operations. He naturally denied the tax avoidance accusation, saying that Apple complies with all laws and in fact pays every dollar amount that it owes. He even added that in his understanding, Apple was the biggest taxpaying company in the U.S.
In the meantime, member states of the European Union have all agreed on passing the so-called "automatic exchange of information on cross-border tax rulings" which is slated to take effect on Jan. 1, 2017.
"The automatic exchange of information on tax rulings will enable member states to detect certain abusive tax practices by companies and take the necessary action in response," announced the European Commission in a statement made to the press. "It is expected that this initiative will deter tax authorities from offering selective tax treatment to companies once this is open to scrutiny by their peers. This will result in much healthier tax competition."
