A new Citizens for Tax Justice report shows that 10 US companies – including Nike, Apple, and Microsoft – have locked a sizable portion of their profits into overseas accounts to avoid paying taxes any where.
Analyzing the FEC reports filed by these companies, CTJ discovered several tax footnotes that reported certain foreign earnings as “indefinitely reinvested” – a tax loophole that enables companies to skip out on disclosing the cost of US taxes they should be paying on their foreign-earned income.
Instead, these companies recorded an estimate of taxes they would have to pay if their foreign income was invested back into the US (called “repatriated income.”) CTJ noted that 10 US companies had recorded the full 35% tax rate as their estimate for repatriated income – meaning no other taxes had been paid any where at any point to offset a difference.
In an earlier report, CTJ found that 285 ‘Fortunate 500’ companies list “indefinitely reinvested” foreign income on their FEC filings. yet only 47 of them offer an estimate of tax owed on that income.
What’s more problematic: CTJ conjectures that foreign income of this kind is not actually earned by operations overseas, but is rather an example of “offshore profit shifting” – profits that are earned in the US, but then shifted to tax havens like Bermuda and the Cayman Islands.
CTJ warns that under a Romney administration, offshore profit shifting could give US-based companies “a permanent tax holiday” by changing the US. international tax system to a territorial system.