Key Facts About Tax Havens & Corporate Tax Reform

Tax Havens and Offshore Profits

 

 

Repatriation Tax Holiday – Temporary Tax Amnesty

 

  • Claiming they want to create more U.S. jobs, corporations are advocating for another tax holiday to avoid taxes on overseas profits being repatriated back to the United States. In 2004, the same promises were made when the tax rate was temporarily set at 5.25% (far below the statutory rate of 35%), but 92% of the funds were used to enrich shareholders through stock repurchases and dividends. (National Bureau of Economic Research, June 2009, p. 19)

 

Territorial Tax System – Permanent Tax Amnesty

 

  • If the U.S. shifts to a territorial tax system multinational corporations will have even more incentives to shift profits and jobs overseas because the profits they “book” in a foreign country will be taxed at that country’s tax rate, which can often be a low tax rate or no tax. No U.S. tax will be applied, as is currently done, essentially making the world a giant tax haven.
  • It is estimated that such a system would encourage U.S. corporations to create at least 800,000 jobs in low-tax countries rather than here at home. (Tax Notes, Sept. 13, 2012, p. 2)
  • A territorial tax system would also increase the deficit by $130 billion over 10 years. (President’s Economic Recovery Advisory Board, August 2010, p. 90)

 

Public Opinion from Hart Research Associates, January 2013

 

  • 78% of voters believe that making sure big corporations pay their fair share of taxes is an important budget goal (55% extremely important), and 80% say the same about closing tax loopholes that benefit big corporations. (Question 7a)
  • By a 73%-25% margin, voters approved of closing loopholes that allow corporations and wealthy individuals to avoid paying U.S. taxes by shifting income to overseas tax havens. (Question 12)
  • By a 73%-20% margin, voters disapproved of allowing corporations to not pay any U.S. taxes on profits that they earn in foreign countries – essentially rejecting the basis of a “territorial tax” system. (Question 12)