Offshoring is the issue ! not out-sourcing !!
As Deep Throat Said: "Watch the Money" !!
Foreign Tax Havens Costly to U.S., Study SaysBy LYNNLEY BROWNING
NY Times Business Section
Published: September 27, 2004
America's biggest corporations are increasingly funneling profits earned in the United States to tax havens around the globe, depriving the United States Treasury of anywhere from $10 billion to $20 billion in lost tax revenue each year, according to a new study.
The study, to be published today in the trade journal Tax Notes, says that United States multinational corporations shifted $75 billion in domestic profits last year to no-tax and low-tax foreign havens like Bermuda and Ireland.
The study's author, Martin A. Sullivan, said that legal loopholes and tax credits could mean in theory that no taxes are owed to the United States government on the shifted income. But he wrote that the shifting is more likely to result in annual tax losses to federal coffers of $10 billion to $20 billion. He said yesterday that at least some of the transfer probably occurred through questionable tax shelters.
In a related study, published by Tax Notes earlier this month, Mr. Sullivan concluded that that profits reported by American multinational companies from their foreign subsidiaries, and not from their operations based in the United States, soared 68 percent since 1999, to $149 billion last year. The earlier study said that the rise in foreign earnings was not accompanied by any gain in real economic activity in the tax havens, suggesting that multinationals were increasingly using offshore tax shelters to shield earnings.
Mr. Sullivan is a former Treasury Department economist who specialized in international taxation. His study is based on Commerce Department data. His estimates of domestic profit-shifting and the corresponding tax losses are for earnings generated by the United States-based operations of American multinational companies, and not for earnings generated by their foreign subsidiaries in low-tax countries.
Under current United States tax laws, American companies can defer taxes on profits earned offshore as long as those profits are not returned to the United States. An updated study by J. P. Morgan Chase in June 2003 said that $650 billion held offshore by American corporations like Exxon Mobil and General Electric was waiting in accounts to be repatriated to the United States if proposed legislation enacting a highly reduced rate is enacted.
posted by Richard at
Monday, September 27, 2004
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