The sum, larger than the entire GDP of Spain, Mexico and Australia, is stashed away in offshore jurisdictions where it does not count towards US tax revenues.
According to The Broken at the Top report by Oxfam, US multinationals such as Pfizer, Goldman, Walmart and IBM have more than 1,600 subsidiaries in offshore tax havens.
The report highlights some of the loopholes companies use to avoid paying tax such as ‘profit shifting’ where a company declares its profits in a low or zero tax jurisdiction instead of where they actually do business.
In 2012, US companies reported $80bn (£56m, €70.5m) of profits in the a British Overseas Territory of Bermuda – more than their reported profits in Japan, China, Germany and France combined.
"Yet again we have evidence of a massive systematic abuse of the global tax system. We can't go on with a situation where the rich and powerful are not paying their fair share of tax, leaving the rest of us to foot the bill. Governments across the globe must come together now to end the era of tax havens."
After analysing the tax affairs of the 50 largest public corporations in the US, Oxfam found that they spent approximately $2.6bn lobbying the US government to maintain favourable tax rules and other beneficial policies between 2008 and 2014.
The charity claims this is just the tip of iceberg and estimates that 90% of the top 200 global companies use tax havens.
Panama Papers
The revelations come in the wake of the ‘Panama Papers’ – the biggest financial data leak in history – which exposed how the rich and powerful around the world set up offshore companies to avoid paying tax in their home countries.
This week, the European Commission announced plans to make big companies more transparent about where they pay tax – a move described by Oxfam as “almost useless” for identifying where tax avoidance may be happening.
The charity said it is urging the UK government to push for stronger rules to ensure multinationals report their taxes and profits in all countries where they do business, including tax havens and developing countries.
Robbie Silverman, senior tax advisor at Oxfam, said: “Yet again we have evidence of a massive systematic abuse of the global tax system. We can’t go on with a situation where the rich and powerful are not paying their fair share of tax, leaving the rest of us to foot the bill. Governments across the globe must come together now to end the era of tax havens.”
Silverman added that poorer countries are “particularly” hit hard by these tax-evasive practices – losing an estimated $100bn a year.
He said: “When corporations don’t pay their fair share of taxes governments are forced to cut back on essential services or levy higher taxes on the rest of us. It’s time governments stopped pandering to big business and started working for the good of their citizens.”
Taxes vs subsidies
The latest findings also show that America’s most prominent companies, which together made nearly $4trn in profits globally between 2008 and 2014, received a staggering $11 trn in US government support over the same period.
Oxfam calculates that during this period, these companies collectively received approximately $27 in government subsidies and tax breaks for every $1 they paid in federal taxes.
Furthermore, for every $1 spent on lobbying, the 50 largest US firms collectively received $130 in tax breaks and more than $4000 in subsidies from the US government.
