GAO Reports Bailout and Tech Firms Love Tax Havens

theodp writes "Most of America's largest publicly traded corporations and Federal contractors — including those receiving billions of dollars from US taxpayers to finance their recovery — have set up offshore operations that could help them avoid paying US taxes, according to a GAO study released yesterday. Of the 100 largest public companies, 83 do business in tax-haven hot-spots like the Cayman Islands, Bermuda, and the British Virgin Islands. The report found that Citigroup, a recipient of $45B in bailout funds so far, has set up 427 subsidiaries in tax-haven countries, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Household names on the lists from the tech sector include Apple (1 tax haven subsidiary), Cisco (38), Dell (29), HP (14), Intel (6), IBM (10), Microsoft (8), Motorola (4), and Oracle (77)."

Comments

Tax policy

[XanC]

Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem. Can you blame these companies for getting away?

Other countries charge income tax based on income earned in that country. The US charges income tax for income earned in any country. Where would you set up your company?

The FairTax would instantly make the US the world's tax haven.

Re:Tax policy

[quanticle]

Taxes are the price we pay for civilization.

The reason places like Luxembourg, Cayman Islands, etc. can get away with charging low (or no) corporate tax is that those places are small and relatively lightly populated. Therefore, the government there doesn't have a whole lot of needs, and can get away with a light budget. The solution to this inequality, as others have suggested, is to close loopholes and make sure that corporations are paying their fair share of taxes, not to reduce the size of our government to that of Luxembourg.

Re:Tax policy

[Yokaze]

> Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem.

Rest of the world? The economical rest of the world is having the same problem. It isn't like they said, Tax Havens like Canada, France, UK, Germany or Japan.

Simple tragedy of the commons. Tax havens are small nations, which profit over-proportionally from shift of profit to their nations. A lower tax in small nations results in an increase in tax-income due to accounting of companies in larger economic nations. Hardly a sustainable approach for larger economies.

> Can you blame these companies for getting away?

Well, those companies make profits in nations, which provide them infrastructure, educated people as working force and affluent people as customers. Then they transfer the profits to a different nation due to lower taxes, thereby reducing their contribution to the same society, which provided for their profits.
I'd say that is hardly laudable.

Re:Tax policy

[Nimey]

Wrong. The solution is mass genocide, so that the United States is just as sparsely populated as Luxembourg and our taxes go down to similar levels.

Vote Genocide in 2010!

Re:Tax policy

[DavidTC]

I love how crazy people talk about how much percentage of taxes a percentage of people should pay, like that has anything to do with anything. We are taxed on income here, not per person.

Those 1% earned 22% of all income. Hence at the very least they should have paid 22% of all income tax, in a crazy world where everyone pays exactly the same proportion of income tax.

But no, loons like you like to imply they're paying a huge huge huge burden by using '1%' and '40%', instead of twice as much proportionally.

Same with the top 5%, which earned 37% of all income, and hence should have paid at least 37% of all income taxes. So 60% is not some amazing step, that's only about 50% more than they should be paying in a completely 'fair' system.

But I'm sure if it was like that, people like you would be whining that the top 1% paid 22% of all income tax.

Re:Tax policy

[Score Whore]

You are now in a higher tax bracket, paying %25. So you take home $24,765 in that year. Whoa. You got a raise and you take home less? Your weekly check is now $476.25. You got a raise, so you take home less.

No. Really you don't. Tax brackets don't work like that. The fact that you don't even understand how taxes work, makes me believe that you've never paid taxes in your life. So why would we take tax advice from someone who doesn't understand the current system, and probably doesn't even pay taxes?

You only pay the tax rate in a bracket for the money that actually falls in that bracket. In your example you'd pay 15% of the amount up to $32,500, then 25% on the $520 between $32,500 and $33,020. So the person's take home would actually go up $7.50/week to $538.75.

US Corp. Tax Load VS Other Countries is...

[BoRegardless]

2nd highest in the industrialized world behind only Japan, as I recall the most recent article.

California has the highest or 2nd highest corp. (and other) taxes and has a net outflow of population compared to inflow.

You don't think taxes has something to do with economic decisions?

Think again.

Re:US Corp. Tax Load VS Other Countries is...

[yachius]

The billions and billions of dollars that sit in corporate bank accounts shouldn't be taxed? CEOs will just start using expense accounts for everything instead of multi-million dollar salaries.

This isn't surprising...

[solder_fox]

Theoretically, their duty is to maximize return on investment for their stockholders, which means doing everything they can legally to minimize their tax liability. So if a tax shelter is legal, expect them to use it. (If it's not legal, expect them to try to pretend it's legal.)

Now, though, because in some cases their partial owner is the U.S. government, there is a conflict of interest between the interests of the government shareholder and the private shareholders.

Re:This isn't surprising...

[grep_rocks]

Mod parent up - companies exist because we the people let them exist - they have a charter to do something "beneficial" to society - like making cars, jellybeans or whatever... - that is why companies were invented so that groups of people can get together aggregate capital and do something useful for society - if corporations act as sociopathic parasites which privatize profits and shove costs onto the rest of society then they should be shut down and their directors jailed - people forget what companies exist for - they do not exist in and of themselves but in the context of the rest of society - duh, why have companies if they just fuck the rest of society.... but libertarian slashdotters seem to think that compaines should be able to do what ever the fuck they want while screwing the rest of us, like they are really something other than a fucking legal contract... we forget why companies were even allowed to exist in the first place.

Re:It's a TARP!

[Facetious]

I saw the same email you did, and the originator wasn't very good at math. It is closer to $400 per American, not $300,000.

Judge Learned Hand said it best

[mr_death]

"there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible".

People and companies respond to incentives -- it is really surprising that the bizarre tax structure in the US pushes companies to form subsidiaries? Apparently it is, to either clueless or grandstanding politicians.

Yes.

[copponex]

I really get frustrated when doublespeak is acceptable. It's like the question, "Are prisoners in Guantanamo being tortured?" If they weren't being tortured, they would be in New York state, sitting in the same jail cells we use for other suspected murderers. The fact that anyone is asking the question is mind-boggling.

Similarly, any company that sets up in a small country that they do no business in is obviously up to something. Otherwise they wouldn't be there.

American business is a game, where the winners are those who best exploit their workers, the tax code, government contracts, and the environment. The most important bit is not getting caught, and having a lot of lawyers if you do.

(I'd like to defuse any rebuttal by saying "Wal-Mart.")

Re:Yes.

[russotto]

It's like the question, "Are prisoners in Guantanamo being tortured?" If they weren't being tortured, they would be in New York state, sitting in the same jail cells we use for other suspected murderers.

Err, no. The main reason they are held in Guantanemo was for a jurisdictional dodge about holding them at all. One that didn't work out, as it turns out; the courts didn't buy the idea that they were beyond the reach of US courts just because they weren't within the boundaries of the United States.

Similarly, any company that sets up in a small country that they do no business in is obviously up to something. Otherwise they wouldn't be there.

Nothing in this report says the companies do no business in the "tax haven" countries. Apple originally set up in Ireland to make Powerbooks, as I recall. They don't do manufacturing there any more but it's still their European headquarters. Coke and Pepsi almost certainly sell sugar water in all those tax haven jurisdictions. Intel does manufacturing in Costa Rica.

Multinationals are, well, multinational. It's hardly a surprise when they do business in companies the IRS or GAO isn't fond of, whether that's why they do it (which it probably is, in many cases) or not.

Anyway, one of the definitions for the countries on this list was "...jurisdictions that have a high level of nonresident financial activity, and may have characteristics including low or no taxes, light and flexible regulation, and a high level of client confidentiality. " Horrors. Why would a country ever want to do that?

Re:Yes.

[truthsearch]

I guess you haven't heard of many of the "offices" in the Cayman Islands consisting of one room, one phone, and one employee (never at his desk). Many exist purely to claim business in the country and filter money for tax purposes. They do no business there at all but save taxes.

Of course, this isn't every office or company. But many.

Re:Yes.

[Achromatic1978]

Nothing in this report says the companies do no business in the "tax haven" countries.

So, in other words, you didn't actually read the report. Just skimmed through, and then immediately jumped on Slashdot to slap someone down. From said report:

The GAO found 17 companies with no business in tax-haven locales, including Fannie Mae, Freddie Mac, United Parcel Service, Verizon, Lockheed Martin and Northrup Grumman.

Re:Yes.

[TubeSteak]

Nothing in this report says the companies do no business in the "tax haven" countries. Apple originally set up in Ireland to make Powerbooks, as I recall. They don't do manufacturing there any more but it's still their European headquarters.

LoL

Ireland has veeeeery friendly tax laws and is a prime example of a Country where individuals and corporations send money to dodge US taxes. Part of the reason so many individuals and businesses setup their tax shelters in Ireland is specifically because Ireland does not have the public perception of being a tax haven.

The only reason Ireland (as a member of the EU) can do this is because EU law only prevents countries that meet the 'EU economic norm' from playing such games with tax law. Once Ireland develops, those convenient tax laws will have to be changed.

Re:Yes.

[postbigbang]

Apple setup in Ireland to appease an EU mandate regarding labor content in their products. This sort of thing was also done by the US to Japanese TV manufacturers. It's a time-honored way to get manufacturers to spend a little money in the country they're selling into-- to avoid getting hit with taxes and duties.

However, very little manufacturing goes on in the Caymans, the BWI, and Luxembourg. They're tax havens, just like Cheney's Halliburton likes to use. Getting back that revenue would mean the end of corporate welfare, and that's unlikely to happen soon.

So call a shovel a spade and don't weasel word about the implications.

Re:Yes.

[DavidTC]

It is perfectly normal in a time of war to hold prisoners (or "unlawful combatants") outside of the regular prison system. Torture is a completely separate issue.

Um, no, it's not. It's perfectly normal to hold POWs outside the prison system.

It is not normal to make up a category called 'unlawful combatants' and hold them both outside the POW and prison system.

Re:Yes.

[digitalunity]

I've on this subject frequently really.

http://slashdot.org/comments.pl?sid=1086449&cid=26406327

1) Large sums of money have been given to a relatively small number of companies. Only a small percentage of the populace directly work for recipients of federal bailout money. Taking the money back wouldn't have a direct effect on most americans for quite some time(6 months or more).

2) Companies that need credit to cover payroll would have been in trouble before the credit crunch anyway, as this is usually a last ditch effort to save a company.

3) I'm a student. I don't foresee getting kicked out of school because of the financial market being in the shitter unless the feds cut off stafford loan subsidization, which is very unlikely to happen under a democratic or even republican administration.

4) Blowing over a trillion bucks to save companies who participated in a delusional pyramid scheme of realty market overvaluations isn't a good way to spend taxpayer money, especially considering the money IS BEING SAT ON. That money should have been given directly to homeowners under a grant program to keep people in their homes.

Right now, thousands of homeowners are evicted every day despite the $750B given to the banks that own the homes. It's a fucking tragedy.

Hell yes I can blame them.

[khasim]

They are receiving US GOVERNMENT funds taken from US TAXPAYERS and they're stashing them in foreign tax havens.

This is solely for the benefit of their executives. It will not help rebuild the US economy.

There needs to be a new law passed TODAY (drag Congress back in) that makes that practice illegal.

If you want "bailout" funds, you cannot use a foreign tax haven.

If you use a foreign tax haven, you cannot receive "bailout" funds.

Why should the US taxpayers finance some CEO's retirement villa in Monte Carlo while the economy drags?

Re:Hell yes I can blame them.

[John_Yossarian]

While taxpayer funds are being used in the "bailout", this is not free money. There are a few strings attached related to executive compensation and raising dividend rates on common stock. And also, it is not free money. The bailout is closer to being a loan than a gift. (Actually the bailout is the government purchases preferred stock at a specified price that pays a nice interest rate - 5% initially but this later raises to 9%.) I personally disagree with Government intervention in the market, but the bailout has been misrepresented in the press. It is not free money and the taxpayers are not out 700 Billion dollars.

Legal and understandable -

[Anonymous Coward]

Most of the major companies mentioned are not receiving any "rescue" from the government, and would not want or need any. Additionally, just because a business has set up a subsidiary in another country does not at all indicate that it is trying to avoid taxes. There are many reasons to set up subsidiaries, including requirements of the local governments. These are LEGAL subsidiaries, whether the purpose is for tax reasons or otherwise. The corporate tax rate is so high in the U.S. that some of these businesses (and others) feel compelled to take LEGAL action to lower their taxes to workable levels.

It would STILL be better.

[khasim]

To drive the economy, you want the people with the LEAST money to spend MORE money.

The VELOCITY of the money is what drives our tax system. The government gets more taxes if a dollar is used 100 times than if it is used 10 times.

Buying a pizza - taxed.
Pizza shop owner pays delivery guy - taxed.
Delivery guy goes to dinner with his girlfriend - taxed.
Restaurant owner pays cook - taxed.
Cook buys muffler for car - taxed. ... etc

Pump enough money into the lower economic rungs and more pizza delivery guys will have to be hired to meet the demand for more pizzas.

Give the money to some company that's going to stash it in an off-shore tax haven ... the US jobs stagnate.

Re:It would STILL be better.

[OpenGLFan]

Additionally, feeding money into the top is a flawed strategy for the same reason that pushing a rope is a flawed strategy.

Banks issuing loans have updated their decision-making to account for the people who cannot repay their loans. By loaning $X to people with credit rating A and $Y to people with credit rating B, etc., they can maximize their profit. If you give the bank $10MM dollars, they now have more capital, but that does not change the fact that the maximum profit they believe they can achieve is to loan money according to their studies.

The additional money comes into play only when there are more people seeking loans than the bank has money. This is the definition of the credit crunch and why the companies want a "bailout". However, the Fed has lowered the federal funds rate (the rate at which it lends to banks) to a figure so low that the banks can borrow all the money they want with very little penalty. Giving money to banks does not encourage them to lend.

The root of the problem is that very nearly everything is overvalued, especially at the high end of the scale. Without a bailout, the monetary values of things would return to a sane level. This would allow more lower-middle and upper-middle-class people to afford ownership of companies (rescuing stock prices) and luxuries (improving consumer demand.) Or, in layman's terms: Nobody's buying things now because they're too expensive. The common-sense solution is to price them lower, while the current solution is to give people with money more money and hope they start buying things even though they're too expensive.

Re:fp

[Lord Bitman]

dude, when you do... the coincidence is gonna blow your mind!

Re:fp

[rtfa-troll]

Well if you had both read the fine article before it was overloaded and had to be changed, you would have find that it had a perfect system for getting rich whilst meeting beautiful girls (or boys or non-determined goth types, depending on your taste) which unfortunately I can follow but can't explain. So don't make this mistake next time.

They have a duty to the shareholders

[Superpiduh]

If these companies didn't minimize their corporate taxes through any (legal) means possible, then they are doing a disservice to their shareholders. I would argue that they are doing a criminal disservice by not minimizing their taxes - they are not maximimizing the return on investment to their shareholders. Assuming that the money saved in taxes doesn't end up all being spent on hookers and blow for the top executives of a company, minimizing taxes helps the business grow. If you think paying taxes is such a great idea, go ahead, volunteer some extra money to the tax department, or avoid taking any of your legal deductions.

Corporate, torture apologists

[copponex]

Err, no. The main reason they are held in Guantanemo was for a jurisdictional dodge about holding them at all. One that didn't work out, as it turns out; the courts didn't buy the idea that they were beyond the reach of US courts just because they weren't within the boundaries of the United States.

Nope.

http://www.nytimes.com/2008/02/17/opinion/17davis.html?_r=1&ex=1360990800&en=a3b1d35d17a4d480&ei=5090&partner=rssuserland&emc=rss&pagewanted=all

My policy as the chief prosecutor for the military commissions at Guantanamo was that evidence derived through waterboarding was off limits. That should still be our policy. To do otherwise is not only an affront to American justice, it will potentially put prosecutors at risk for using illegally obtained evidence.

Emphasis mine.

Nothing in this report says the companies do no business in the "tax haven" countries.

Sure. If I posited the same argument that a person who fit the profile of a crack dealer was passing "something" to someone in a car after exchanging money, you'd be the first in line to throw him into prison. I'm not saying they don't deserve due process, but a judicial branch that wasn't a secretarial service for corporate America would at least investigate.

Horrors. Why would a country ever want to do that?

I'm not blaming the country, or claiming the corporations are automatically guilty. When they do business that removes tax money from the community that built it's wealth, I consider that a worse offense than someone who is falsely collecting welfare.

I'm upset with the habit of Americans getting upset over social welfare and not over corporate welfare. When corporations have more rights than an individual person, not even equal rights, I consider that to be reprehensible. I can't buy a palm tree in Costa Rica and reduce my tax liability as an individual, but I could if I formed an LLC. In my opinion, that's bullshit.

Re:Oh please, torture?

[TechWrite]

You know, the torture going on isn't just waterboarding, humiliation, koran desecration, human pyramids, being threatened with dogs, or "not getting the right jail." It includes what acts that are unarguably torture, including being beaten and chained up until dead (http://en.wikipedia.org/wiki/Dilawar_(torture_victim)). Even when the sadistic bastards believed the detainee was innocent.

Some other examples of "not really torture" (http://en.wikipedia.org/wiki/Abu_Ghraib_torture_and_prisoner_abuse):

        * Urinating on detainees
        * Jumping on detainee's leg (a limb already wounded by gunfire) with such force that it could not thereafter heal properly
        * Continuing by pounding detainee's wounded leg with collapsible metal baton
        * Pouring phosphoric acid on detainees
        * Sodomization of detainees with a baton
        * Tying ropes to the detainees' legs or penises and dragging them across the floor.

And some other forms of torture, with real torture names that can really kill you, like strappado (http://en.wikipedia.org/wiki/Manadel_al-Jamadi). Although folks like you, Rush Limbaugh and all the other right wing nuts seem to prefer the doublespeak term "stress positions."

And I guess because some soldiers were just so stressed out and needed to blow off steam, some prisoners were just tied up, put in sleeping bags and beaten to death (http://www.washingtonpost.com/wp-dyn/content/article/2005/08/02/AR2005080201941.html).

But you're right, waterboarding isn't torture and it was only 4 guilty as hell terrorists anyway.

Re:The collection of taxes is not theft!

[Incubusion]

Okay, try this. You're constantly using infrastructure, and like it or not the government has been integral in the production of and modernization of many of the services (Police, fire department, a justice system, which however flawed at least exist) you enjoy as well as the protection of those services you enjoy (For all the ills of the military, and for all the idiocy of war, it is still a necessary evil to have at least a defensive force because the world does not run on rational discussion just yet). Taxes fund and ensure these programs and projects continue. Yes, taxes are also being and have been taken far beyond what they should be and at times are used improperly. But that's what the legal system is for, and while not perfect it's rarely one to sit back and overlook something big like government embezzlement when it's brought to the public.