Editorial: Stop Hiding the Money

They say that the federal deficit problem comes from excessive spending by the government, not a lack of tax revenue, and that cutting funds for social programs to help the poor is the only solution. That would not be necessary if U.S. multinational companies did not hide their earnings in tax havens in order to evade their fiscal responsibilities.

An analysis made by Citizens for Tax Justice released yesterday showed that the largest companies in the U.S. dodge paying more than $90 million a year by putting the money they make here in the name of smaller, fake businesses. The best example of this is Pfizer, the world’s largest pharmaceutical company, which has over $74 million in 151 subsidiaries located in tax haven locations. Between 2008 and 2014, they made more than 40% of their sales in the U.S., but reported no taxable income. To top it off, despite having global earnings of $43 million between 2010 and 2012, Pfizer received $2,000 million in refunds, paid for by the everyday taxpayer.

The purpose of tax havens is to form companies and use them to make money. In the case of Pfizer, they transfer their patents to a company they own at one of these locations where they are exempt and take all the earnings to pay themselves. This is an aberration that allows companies to have an address in Bermuda or the Cayman Islands and report a total of colective earnings equal to 1,600 times what that island produces per year.

Of all Fortune 500 companies, 358 have  at least 7,622 subsidiaries in tax haven locations, including Apple, Nike, PepsiCo, Morgan Stanley, Google,  Microsoft and Walmart. The proliferation of this type of subsidiary, the outsourcing of local jobs to countries offering cheap labor, and the million-dollar bonuses paid to their executives reflect a change of attitude from the old mentality that “what is good for General Motors is good for the U.S.”

President Obama unsuccessfuly suggested a reduction of the 35% tax interest rate to a “transitory tax” of 14%, when some CEOs want it to be 5% in order to bring in the money. As long as no agreement is reached, the tax payer will continue paying for the vacuum left by large corporation tax evasions.