Many U.S. Companies Use Tax Havens to Avoid Paying Taxes

Grand Cayman is the largest of the three islands in the Cayman Islands. It has a total size of approximately 75 square miles. The Cayman Islands are the fifth largest financial center in the world.

Tax Shell Game: How Much Did Offshore Tax Havens Cost You In 2010? (US Public Interest Research Group):

Tax havens are countries with minimal or no taxes, to which U.S.-based multinational firms or individuals transfer their earnings to avoid paying taxes in the United States. Users of tax havens benefit from access to America’s markets, workforce, infrastructure and security, but pay little or nothing for it—violating the basic fairness of the tax system.

Abuse of tax havens inflicts a price on other American taxpayers, who must pay higher taxes—now or in the future—to cover the government’s revenue shortfall, or must deal with cuts in government services.

The United States loses approximately $100 billion in tax revenues every year due to corporations and individuals sending their money to offshore tax havens.

• In 2010, making up for this lost revenue cost the average U.S. tax filer $434. That’s enough money to feed a family of four for three weeks.

• The taxpayers who pick up the largest share of the tab live in Delaware and New Jersey. On average, tax filers in those states paid an additional $920 and $752, respectively.

Some of America’s biggest companies—including many who have taken advantage of government bailouts or rely on government contracts—use tax havens. As of 2008, 83 of the 100 largest publicly traded U.S. corporations maintain revenues in offshore tax haven countries.

• Goldman Sachs, which reported more than $2 billion in profit in 2008, was able to use its 29 tax haven subsidiaries to reduce its federal tax bill to just $14 million. That means that Goldman Sachs’ CEO Lloyd Blankfein, who made $42.9 million that year, earned more than three times the amount that the company paid in federal taxes.

• General Electric appears to have paid no federal income taxes in 2010, despite reporting profits in the United States of $5.1 billion. The biggest company in the country, GE has lobbied hard for tax breaks and loopholes in the federal tax code, and shifted many of its profits to tax havens to avoid paying U.S. taxes. GE employs nearly 1,000 people in its tax department to help exploit those loopholes, but has laid off one-fifth of its U.S.-based workers since 2002.

• ExxonMobil made $19 billion in profit in 2009, but paid no federal income taxes.

• Since 2007, Google has kept its effective corporate tax rate at 2.4 percent, despite mostly operating in countries with corporate tax rates of well over 20 percent. Google accomplishes this high level of tax avoidance by sending many of its earnings through Ireland, to the Netherlands, and then on to Bermuda. Using tax havens and other loopholes, Google has avoided $3.1 billion in taxes since 2007.

• As of mid-2010, technology company Cisco had yet to pay U.S. taxes on $31.6 billion of earnings that was sitting offshore.

• The airplane manufacturer and defense contractor Boeing earned profits of $9.7 billion from 2008 to 2010, yet paid no federal taxes, thanks in part to its 38 subsidiaries based in tax havens.

Ironically, firms such as Boeing that go to great lengths to avoid paying federal taxes also derive a large portion of their business from contracts with the federal government. In 2007, the Government Accountability Office calculated that, of the 100 largest publicly traded U.S. federal contractors, 63 have subsidiaries in countries with broad financial privacy laws or that are tax havens.

Contractors are not the only users of tax havens who benefit from America’s market, workforce, infrastructure and security but pay little or nothing for them—violating the basic fairness of the tax system. TransOcean, for example, the owner of the Deepwater Horizon platform that caused the Gulf oil catastrophe in 2010, was “headquartered” in the Cayman Islands from 1999 to 2008 and avoided paying many federal taxes. Yet when the oil spill occurred, TransOcean relied upon federal personnel and vessels to respond quickly to the disaster. Though the federal government subsequently billed TransOcean and other responsible parties for the cost of the cleanup, TransOcean greatly benefited from the rapid response made possible by other taxpayers who contributed their share over the years.

Citigroup took full advantage of U.S. markets and infrastructure until its business model failed and it became one of the banks most responsible for the 2008 economic collapse. During the recession, Citigroup managed to survive, thanks to a $45 billion bailout from federal taxpayers, despite the fact that the company has 427 subsidiaries located in tax havens—more than any other company in America, according to a 2008 report by the Government Accountability Office—and thus has avoided paying many federal taxes.

When corporations and wealthy individuals avoid paying taxes, ordinary taxpaying households and small businesses end up picking up the tab for the missing revenue to the U.S. Treasury—an especially galling outcome given the deep cuts being proposed to many programs that benefit ordinary Americans.

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1 comment for “Many U.S. Companies Use Tax Havens to Avoid Paying Taxes

  1. Robin Petersen
    June 4, 2011 at 1:56 pm

    Robin Patrick Petersen
    100 Robins W. Parkway #105
    Warner Robins, GA 31088
    (480) 993-5344
    April 30, 2011

    The Honorable Patrick Leahy, U.S. Senator
    437 Russell Senate Bldg
    United States Senate
    Washington DC 20501

    Subj: Extraterritorial Jurisdiction Act – Boeing Fraud/Passport Confiscation

    Dear Senator Leahy,

    I am writing this letter to ask for your assistance. I do so because I believe your work in introducing a Congressional Bill entitled H.R. 4567 Civilian Extraterritorial Jurisdiction Act (CEJA) in February of 2010 may apply to my particular situation. You have my written consent to investigate should you decide to help me.

    In January of 2009, I was employed by “The Boeing Company” (TBC) and its wholly owned subsidiary Boeing International Support Systems, Saudi Arabia (BISS) who have engaged in fraudulent and criminal activities (First) here in the United States and then again in the country of Saudi Arabia.

    The criminal activity I am referring to was (First) committed here in the United States and arises from fraudulent recruiting practices that BISS is conducting while operating as an unregistered business from Oklahoma City, Oklahoma and in St. Louis, Missouri. The criminal activity overseas stems from fraudulent representations made by TBC management; fraudulent activities taking place within these companies operations; and the fact that Boeing/BISS management confiscated my U.S. Passport and did not returned it upon my written demand. I believe the confiscation of a U.S. Passport; not returning it upon demand; and holding a person in a foreign country for months against their will constitutes the criminal act of false imprisonment.

    During the time I was being held against my will I reported this incident to Boeing’s Ethics Department, Boeing’s CEO and to U.S. Department of State, but heard nothing back from them. On June 8th, 2009 (nearly four months of captivity) I was able to get out of Saudi Arabia with the assistance of a security officer who was working at the U.S. Consulate who demanded that Boeing/BISS return my passport. When I returned home to the United States, I reported this incident to the Phoenix FBI. Although, I provided the FBI with as much detail as I could they never took any action. I then contacted Senator John McCain who passed my complaint on to Senator Jon Kyl who then inquired on my behalf to find out why law enforcement (the FBI) failed to act. The U.S. Justice Department responded informing Senator Kyl that the FBI stated that they did not have jurisdiction in this matter. I strongly disagree with the statement that the FBI provided Senator Kyl because the criminal act of “Fraud” was in fact initiated here in the United States by a company (BISS) that according to its own attorneys has no legal right to be operating in this country. (They are not legally registered in the U.S. and are not paying U.S. Corporate income taxes) The U.S. Department of Justice without careful analysis appears to have failed to recognize or consider this fact. (Please find Senator Kyl’s letter to me dated October 29, 2010 and the response he received from the U.S. Department of Justice dated 07 Oct 2010)

    In May of 2010 I filed a lawsuit in the U.S. District Court of Arizona alleging wrongdoing by TBC and BISS. TBC and BISS have filed motions to have my case dismissed against them based on improper forum selection. The court has granted their motion to dismiss, ruling improper forum selection while not taking in to account that I was defrauded by BISS (First) here in the United States and that BISS is operating illegally within the United States.

    1. Please find evidence enclosed and listed as (Exhibit A) that attorneys representing “The Boeing Company” (TBC) and Boeing International Support Systems (BISS) have provided a sworn affidavit from Yvette B. Kumi a Boeing Corporate paralegal who states ” the only jurisdiction in which BISS is authorized to do business is the Kingdom of Saudi Arabia.”

    2. Please find enclosed as (Exhibit B) a business card that I received from a Mr. Dan Nelson who clearly identifies himself as a Manager for International Support Systems – BISS and who states his operations are located at 6001 S. Air Depot, Oklahoma City, OK.

    3. Please find enclosed as (Exhibit C) an email from BISS Manager Daniel J. Nelson stationed and “Doing Business” in Oklahoma City, Oklahoma. This email identifies that his supervisors are operating from St. Louis, Missouri.

    4. Please find enclosed (Exhibit D) a Boeing Company press release dated (Jan. 7, 2010) that indicates that the Boeing Company is making leadership changes to include Mr. Torbjorn Sjogren to be named Vice President of International Support Systems and Alsalam Aircraft Company. Mr. Sjogren lives and operates from St. Louis, Missouri.

    5. Please find enclosed correspondence from Boeing/BISS attorney Geoffrey M.T. Sturr that provides evidence that BISS/Alsalam has financial accounts (Citi Bank, NY) located here in the United States.

    6. Please find enclosed a copy of my attorney’s motion to vacate and file an amended claim against the Boeing Company and Boeing International Support Systems (BISS).

    Although Boeing attorney’s with all the power of their company have been able to twist the facts in their favor, please understand that it is my contention that “Fraud” took place (first) here in the United States. I should be allowed the right to litigate here in my own country and not forced to return to Saudi Arabia to obtain justice when that country subverts freedom, continues to violate the rights of others, and is listed by our own government as a Tier III violator whose legal system is unjust and subject to corruption.

    I would ask that you please conduct your own investigation, asking the Attorney General again why criminal activity such as “Fraud” that was committed by TBC/BISS in this country cannot be investigated by our own law enforcement officials (the FBI) and why the U.S. Justice Department has failed to provide due diligence in enforcing the laws of our country which are instituted to protect its Citizens from those who knowingly and willfully engage in criminal acts. I look forward to hearing from you. Thank you for taking the time to review the enclosed material.

    Sincerely,

    Robin Patrick Petersen

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