Dear Commons Community,
A New York Times editorial today calls on President Obama to take executive action against corporations that avoid paying taxes by moving capital to foreign countries. It also takes issue with the banks that are the enablers of these companies. The editorial specifically mentions several of the most flagrant companies:
“Shortly before Congress recessed last week for a month-long break, the Senate Permanent Subcommittee on Investigations issued a report and held hearings on “basket options,” financial products created by Barclays and Deutsche Bank and used by prominent hedge funds to dodge billions of dollars in taxes, according to the subcommittee. The inquiry follows earlier subcommittee investigations into rampant tax-avoidance tactics at Microsoft, Hewlett-Packard, Apple and Caterpillar. The hit to the United States Treasury is severe: According to a study cited at an Apple hearing last year by the subcommittee chairman, Senator Carl Levin, a Michigan Democrat, 30 of the largest American multinationals, with more than $160 billion in profits, “paid nothing in federal income taxes over a recent three-year period. Zero.”
The full editorial is posted below.
The greatest hypocrisy is that several of these companies such as Microsoft then set up foundations that provide grants that are but a small fraction of the taxes that they have not paid.
Tony
=============================================
New York Times Editorial
August 7, 2014
Evidence of excessive corporate tax avoidance keeps piling up. And so do Congress’s excuses, mainly from Republicans, for not doing anything to curb it.
Shortly before Congress recessed last week for a month-long break, the Senate Permanent Subcommittee on Investigations issued a report and held hearings on “basket options,” financial products created by Barclays and Deutsche Bank and used by prominent hedge funds to dodge billions of dollars in taxes, according to the subcommittee. The inquiry follows earlier subcommittee investigations into rampant tax-avoidance tactics at Microsoft, Hewlett-Packard, Apple and Caterpillar. The hit to the United States Treasury is severe: According to a study cited at an Apple hearing last year by the subcommittee chairman, Senator Carl Levin, a Michigan Democrat, 30 of the largest American multinationals, with more than $160 billion in profits, “paid nothing in federal income taxes over a recent three-year period. Zero.”
The congressional summer recess also came before lawmakers took action on either of two Democratic bills to stop a rising wave of “inversions.” That’s the process whereby an American corporation acquires a company in Britain, Ireland, the Netherlands or elsewhere in order to reincorporate abroad and cut its American taxes — even as its headquarters, officers, most of its shareholders and much of its business remain in the United States.
Inversions completed to date are expected to sap the Treasury of nearly $20 billion in taxes in the next decade. And that’s just the beginning. At a recent hearing of the Senate Finance Committee, the Democratic chairman, Ron Wyden, said that up to 25 companies, encouraged by big banks that earn lucrative fees on the deals, are currently considering relocating overseas to cut their tax bills.
An ideal solution would be for American and European leaders to forswear competition based on relative tax advantages as bad for everyone. Unfortunately, that would require a level of cooperation and leadership that is nowhere to be found. In the meantime, Congress could stop today’s most egregious tax avoidance tactics if a majority of members wanted to.