American companies have around $2.1 trillion in untaxed profits stashed overseas and would collectively owe an estimated $620 billion in US taxes if they repatriated the funds, according to a new report from two nonprofit groups.
By the end of 2014, nearly three quarters of Fortune 500 companies operated subsidiaries in "tax haven jurisdictions," claim the Citizens for Tax Justice and the US Public Interest Research Group Education Fund in their study.
The 30 worst offenders are responsible for $1.4 trillion of the total, says the report.
Technology firm Apple was holding $181.1 billion offshore – more than any other US company. It would owe an estimated $59.2 billion in US taxes if it tried to bring the money back to the United States, the study said.
General Electric has $119 billion offshore in 18 tax havens, software firm Microsoft is holding $108.3 billion in five tax haven subsidiaries, and drug company Pfizer is holding $74 billion in 151 subsidiaries, the study said.
"At least 358 companies, nearly 72 per cent of the Fortune 500, [collectively] maintain at least 7,622 tax haven subsidiaries," says the report.
In 2004, Congress tried to lure some of the money back to the US. They enacted "tax holiday" as part of the American Jobs Creation Act, enabling companies to bring home or “repatriate” profits at a 5.25 percent tax rate instead of the usual 35 percent corporate tax rate.
It didn't work so well. According to a federal report, firms mostly used the repatriated earnings not to invest in US jobs or growth but for purposes that Congress sought to prohibit, such as repurchasing their own stock and paying bigger dividends to their shareholders. Moreover, many firms actually laid off large numbers of US workers even as they reaped multi-billion-dollar benefits from the tax holiday and passed them on to shareholders.
"Congress can and should take strong action to prevent corporations from using offshore tax havens, which in turn would restore basic fairness to the tax system, reduce the deficit and improve the functioning of markets," the new study concluded.
Congress is considering repeating the 2004 repatriation tax break as part of the Invest in Transportation Act of 2015, cosponsored by Sen. Barbara Boxer (D) of California and Sen. Rand Paul (R) of Kentucky. Repatriated funds would be taxed at 6.75 percent, and all of the new revenues would go to a Highway Trust Fund.
This plan and other similar proposals have already come under criticism. The Center for Effective Government and the Institute for Policy Studies say that "the proposed 'tax holidays' would generate a relatively small, one-time revenue bump while allowing large corporations to avoid much larger amounts of tax owed over the longer term."