Report: Offshore tax havens cost U.S. small businesses $3,244 a year
Small businesses end up picking up the tab for offshore tax loopholes used by many large multinational corporations, consumer advocates Citizens for Tax Justice and the U.S. Public Interest Research Group (PIRG) say.
According to a study by the U.S. PIRG Education Fund, the average U.S. mainland small-business owner in 2014 would have to pay an extra $3,244 in taxes to make up for the money lost in 2014 due to offshore tax haven “abuse” by large multinational corporations.
The PIRG says corporations avoid paying an estimated $110 billion in state and federal income taxes by using accounting tricks to book their profits to subsidiaries in offshore tax havens such as Bermuda, the Cayman Islands and the British Virgin Islands. “This leaves small businesses to compete on an uneven playing field, and they, along with the average taxpayer, end up picking up the tab in the form of higher taxes, cuts to public priorities, or bigger deficits.”
“When large companies shirk their taxes, small businesses get stuck with part of the bill and are put at a competitive disadvantage. Businesses should compete on innovation and the quality of their products, not on the cleverness of their tax attorneys,” stated Jaimie Woo, federal tax and budget advocate for the widely considered left-leaning PIRG.
“At a time when we have an $18.2 trillion national debt; at a time when major corporation after major corporation pays nothing in federal income taxes; and at a time when corporate profits are at an all-time high, it is past time for corporate America to pay their fair share in taxes so that we can create the millions of jobs this country needs,” presidential hopeful Sen. Bernie Sanders stated in the PIRG report’s release.
In January, two offshore loopholes expired along with a collection of dozens of other tax breaks that the group says “overwhelmingly” cater to special interests. The PIRG’s release says that if the U.S. Congress takes no action by the end of the year, these two loopholes – the “active financing exception” and “controlled foreign corporation look-through rule” – will be eliminated from the tax code, “saving small businesses and ordinary taxpayers more than $80 billion over the course of ten years.”
According to the report, U.S.-controlled companies in Bermuda, the Cayman Islands and the British Virgin Islands reported $155 billion in profits in 2010, with Bermuda booking about $94 billion in profits.
Many of the U.S.’s largest and best-known corporations use the tax avoidance schemes to shift their profits offshore and shrink their tax bill, the PIRG reports while pointing at such companies as Citigroup, Pfizer, Caterpillar, Google, General Electric, Microsoft and Bank of America.