Over the past few months, much has been written about how a number of huge corporations in the U.S. pay no taxes. Some of them even use off-shore addresses to avoid taxes in this country. While it doesn’t come as a total surprise, many of these companies put their money overseas. It was reported last month that the company with the most profits parked overseas is General Electric. This is according to a new Bloomberg analysis of 83 corporations. GE said in a Feb. 26 regulatory filing that it was holding $108 billion in profits overseas as of the end of last year. That is up from $102 billion a year before. GE said in the filing that it reinvested most of these profits in foreign business operations and does not intend to bring those profits back to the U.S.
The practice of holding profits overseas has been highlighted as a strategy to avoid paying taxes. GE paid no U.S. taxes at all in 2010, according to the New York Times. GE spokesman Seth Martin called that assertion “untrue” in an email to The Huffington Post. But, it’s significant that GE made no comment on the $108 billion in profits overseas.
Sixty big U.S. companies analyzed by the Wall Street Journal kept on average more than 40 percent of their annual profits overseas last year. The companies have attributed a growing amount of their revenue to foreign sales, and they have assigned patents and licenses to foreign subsidiaries. Thanks to these practices, the U.S. is not only losing out on tax revenue, but it is also missing money kept overseas that will not be used to invest in the U.S. or pay dividends to shareholders.
It has become increasingly common for companies to move or keep their profits overseas. The biggest U.S. companies boosted their offshore cash hoards by 14 percent last year, according to a separate Bloomberg report. Apple, Microsoft and Google have in combination more than doubled their overseas holdings over the past two years. The drugmakers Merck and Johnson & Johnson, according to Bloomberg, each saved about $2 billion last year by shifting profits overseas. Bloomberg reported that some Congressmen, including Sen. Charles Grassley (R-Iowa), want to crack down on corporate tax avoidance. In an attempt to justify what GE is doing, Martin wrote in an email to HuffPost:
GE did not get a tax refund in 2010, and in fact paid U.S. federal income tax and more than $1 billion in other federal, state and local taxes in the U.S. for 2010. GE’s overall tax rate for 2010 was low because we lost $32 billion in our financial business during the global financial crisis.
But GE, with justification, has come under fire for its light tax burden. Though it has been earning billions in profits, the company paid an average tax rate of just 1.8 percent between 2002 and 2011, according to Citizens for Tax Justice. GE CEO Jeff Immelt has said that the U.S. tax system is “old, complex and uncompetitive” and has had a “hugely negative impact” on the economy. But it appears to be pretty good for corporate giants such as GE. Few individuals can get by without paying any taxes and most every person and small business pay at a substantially higher tax rate. It’s past time to bring some reform to this area of concern.
Source: Huffington Post
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