What is a tax haven?

The Government Accountability Office (GAO) describes tax havens as places with no or nominal taxes and little if any reporting requirements.

Why are tax havens harmful?

At a time when countries around the world face severe budget crises, economies continue to bleed massive amounts of revenue due to secrecy in the system and the inability of government’s to collect taxes from the corporations and individuals that benefit from calling the U.S. home.  Anonymous corporations and bank secrecy both here in the U.S. and abroad make it easy for criminals, terrorists and world leaders to hide their money and hard for law enforcement to do their jobs. The issues of losing the revenue and the lack of transparency and accountability here and abroad effects the interests across the political spectrum – from fiscal responsibility to human rights; from job security to national security. The resource drain leads to unnecessary cuts to programs and priorities.

Tax is the missing element in corporate responsibility debates. Corporate responsibility should start with tax compliance.

Anti-tax lobbies seek to portray tax as a cost. This is the wrong way to see it. Tax is not a cost, but a distribution out of profits. That puts tax in the same category as a dividend - a return to the stakeholders in the enterprise. This reflects the fact that companies do not make profit merely by using investors' capital. They also use the societies in which they operate, whether that is the physical infrastructure provided by the state, the people the state has educated, or the legal infrastructure that allows companies to protect their property rights. Tax is the return due on this investment by society from which companies benefit. Moreover, tax is properly due to the state in which a company generates its profit, not to that state to which it can relocate its profit for taxation purposes.

The Big Fake on the Corporate Tax Rate

It has been widely reported that the U.S. corporate tax rate is now the highest in the world.  While in fact, the U.S. rate is the highest at 39.2 percent – the jokes on anyone who actually believes that some of the largest corporations pay anything close to that figure. 

Why? Tax loopholes, subsidies, deductions…a whole host of legal tricks makes 39% a quaint notion.  Our approach to taxing multi-national corporations enables them to legally shift their profits around the world to escape their responsibilities here in the U.S.  Over 80% of the largest corporations do it. And the jokes on us.

Read: the shocking list of inconvenient truths about the corporate tax rate here in the U.S.   We’ll get you started: the average corporate tax rate paid hovers around 12%.

Watch: The Big Fakeout: View this customized video clip that reveals how corporations dodge taxes and the tax rates they actually pay on huge profits. 

http://werenotbrokemovie.com/

Act:  Urge your Senators to support the CUT Loopholes Act – Sign here, send a letter or an email.

Are you a small business owner or formerly a small business owner?  Sign this petition for fair corporate tax reform!

Interested in more evidence?

Read reports and survey results that make the case that corporate loopholes are raiding the U.S. Treasury, hurting small businesses… and are for sale. 

Corporate Tax Dodgers – 2008 – 2010 – Citizens for Tax Justice

Small Business Survey Results on Tax Reform -   American Sustainable Business Council, Main Street Alliance and Small Business Majority

Loopholes For Sale  - U.S. PIRG and CTJ Report on Tax Dodging/Lobbying

Still not convinced that the joke's on us?

Read what our partners saying in opinion pieces and blogs across the country and across the world – representing a different view from the “top” of the corporate tax rate.

The Race to the Bottom on Corporate Tax  - Tax Justice Network USA

“Look who pays less in taxes than Warren Buffet and Mitt Romney?”  - Business for Shared Prosperity

"They pay little or no taxes on massive U.S. profits and then have the gall to lobby for lowering the 'high' corporate tax rate. They’re even campaigning for a tax holiday to 'repatriate' profits they have stashed offshore to avoid taxes. Patriots pay their taxes; they don’t dodge them." – Small Business Chamber of Commerce

“The idea that giant corporations that currently pay no income taxes will suddenly start paying taxes is hilarious.”  - Firedoglake

“Cutting corporate taxes right now is insane”  - A view from across the Atlantic –Tax Justice Network UK

Transfer pricing is one of the most important issues in international tax.

Transfer pricing happens whenever two related companies – that is, a parent company and a subsidiary, or two subsidiaries controlled by a common parent – trade with each other. This happens when, for instance, a US-based subidiary of Coca-Cola buys something from a French-based subsidiary of Coca-Cola. When the parties establish a price for the transaction, they are engaging in transfer pricing.

Transfer pricing is not, in itself, illegal or abusive. What is illegal or abusive is transfer mispricing, also known as transfer pricing manipulation or abusive transfer pricing. (Transfer mispricing is a form of a more general phenomenon known as trade mispricing, which includes trade between unrelated or apparently unrelated parties - an example is reinvoicing.)

It is estimated that about 60 percent of international trade happens within, rather than between, multinationals: that is, across national boundaries but within the same corporate group. Suggestions have been made that this figure may be closer to 70 percent.Estimates vary as to how much tax revenue is lost by governments due to transfer mispricing. Global Financial Integrity in Washington estimates the amount at several hundred billion dollars annually. A March 2009 Christian Aid report estimated $1.1 trillion in bilateral trade mispricing into the EU and the US alone from non-EU countries from 2005 to 2007. The “Magnitudes ” section of our website contains a range of estimates and data.

Many of the roots of the current global economic crisis trace back to offshore financial centers located in tax havens. These include both those located in the smaller, mostly island states like Cayman and Jersey, and the larger tax havens like the City of London, Switzerland, Dublin, Delaware or Luxembourg.

These tax havens did not "cause" the crisis, but they contributed powerfully to it. This happened in a number of interlinked ways:

• They offered what has been called a "get out of regulation free" card to businesses that abuse them.
• The offshore system enabled U.S. financial services companies in particular (but also others) to get around domestic regulations and grow fast, achieving political and regulatory "capture" and contributing to the "too big to fail" banking problem. This happened first in the offshore Euromarkets from the 1960s, and then in the wider global offshore system.
• Unhealthy competition on tax and regulation between tax havens, and between them and other jurisdictions, eviscerated and degraded regulations that may otherwise have staunched the crisis.
• Tax incentives, typically through tax havens, played a major role in accelerating the build-up in debt and leverage across the global financial system.