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For Immediate Release:
Tampa, January 30th – Florida taxpayers could save $100.2 million from a reform to crack down on offshore tax dodging, according to a new report released today by Florida PIRG. The reform, which has already been proven effective in Montana and passed in Oregon, would require companies to treat profits booked to notorious tax havens as domestic taxable income.
Florida PIRG released the new report titled, “Closing The Billion-Dollar Loophole: How States Are Reclaiming Revenue Lost to Offshore Tax Havens.”
“Last year, Florida lost $777 million as a result of the abuse of offshore tax loopholes,” said Dalyn Houser, Florida PIRG Associate. “By modernizing our state’s tax code with this reform, we can keep millions of dollars in Florida every year, while eliminating incentives for moving business offshore, leveling the playing field for Florida businesses that compete with multinational corporations, and protecting regular taxpayers from picking up the tab for tax dodgers."
For years, some corporations that do business here in Florida have dodged taxes by booking profits made in America to tax havens like the Cayman Islands, that levy little to no tax. For example, World Fuel Services based here in Florida, maintains 29 subsidiaries in known tax havens.
This loophole closing uses information that multinational companies already report to states. Montana and Oregon simply treat profits that companies book to notorious tax havens as if it were domestic taxable income.
The reform could be introduced anywhere, but is more available to the 24 states including the District of Columbia that have already modernized their tax codes by enacting “combined reporting,” which requires companies to report on how profits are distributed among jurisdictions so that they are taxed based on how much business activity they do in those places. Florida has not yet passed “combined reporting.”
Here in Florida, the $777 million saved would be enough to fund the salaries of 22,051 new teachers in the state of Florida based on state averages. With all of the problems that Florida has faced with maintaining a budget for education this kind of money would make a profound difference for the education of young people. The $777 million saved from offshore tax havens would pay the in state tuition of roughly 124,000 students at the University of Florida this year.
Fredrick Barr, owner of Barr Creative Services and Community Business Association leader in Orlando states, "These loopholes tilt the playing field in favor of big business while small business gets stuck with the tab. Ordinary families and small businesses have to pay more for public services like roads, schools, and health care when corporations and the wealthy use tax loopholes to avoid paying their fair share.
The $777 million that we lost would fully fund the Medicaid Expansion, and leave money left over for schools and roads. But instead of taking care of small businesses and ordinary citizens we see the Governor wants yet another $100 million dollar tax cut for big business. It's not just unfair, it's unsustainable."
To ultimately put an end to offshore tax dodging – which costs the federal Treasury $90 billion annually and state governments $20 billion annually – federal action is required. But Montana and Oregon have shown that states can do more than sit on their hands waiting for Congress to act. The Montana experience (Oregon’s law, which passed last year with strong bipartisan support, will first take effect this year) has shown that this reform is simple to implement, and can play a real role in closing the state budget gap.
As of 2012, at least 82 of the top 100 publicly traded corporations in the U.S. used tax havens, according to an earlier U.S. PIRG study. American multinational companies collectively hold a staggering $1.9 trillion offshore.
Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:
• Pfizer, the world’s largest drug maker, made 40 percent of its sales in the U.S. over the past five years, but thanks to their use of offshore tax loopholes they reported no taxable income in the U.S. during that time. The company operates 172 subsidiaries in tax havens and has $73 billion parked offshore which remains untaxed by the U.S., according to its own SEC filing. That is the second highest amount of money sitting offshore for a U.S. multinational corporation.
• Google used accounting techniques nicknamed the “double Irish” and the “Dutch sandwich,” according to Bloomberg News. Using two Irish subsidiaries and one in Bermuda, Google helped shrink its tax bill by $3.1 billion from 2008 to 2010.
• Citigroup – a bank that was bailed out by taxpayers during the financial meltdown of 2008 – maintains 20 subsidiaries in tax havens and has $42.6 billion sitting offshore, on which it would otherwise owe $11.5 billion in taxes, according to its own SEC filing. Citigroup currently ranks eighth among U.S. multinationals for having the most money stashed offshore.
According to Dan Bucks, the former chief of Montana Director of Revenue who administered the law for the state from 2005 to 2013, “Montana’s tax haven law brings a measure of tax justice to small businesses, farmers and ranchers, retirees and wage earners who already pay taxes on income they earn in Montana. Without the law, these Montanans would pay more to make up for taxes wrongly avoided by large corporations shifting their Montana income to tax havens.”
You can download the report here: Report
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