As of this year, more than $2 trillion is being stored overseas. This income is not taxable by the U.S. government and has cost the United States approximately $90 billion in tax revenue each year.
When a corporation such as Google, for example, makes profits, the company stores these profits in shell companies overseas in tax havens where the tax rates are very low or nonexistent. Bermuda and the Cayman Islands are two of the most commonly used tax havens in the world for U.S. companies.
The amount of subsidiary (shell company) profits in these nations is often many times the actual size of the tax haven’s gross domestic product, a showcase of the absurdity of the situation.
Various tax code holes and accounting magic constitute the ground for these practices that are essentially in the open but also largely ignored and unaddressed. By using offshore accounts, these companies pay on average a tax rate of 6.9 percent. The U.S. tax rate on this cash would have been 35 percent.
This systematic tax avoidance is unfair to the U.S. taxpayers and should be properly addressed and fixed. Those $90 billion a year could be used for great causes back on U.S. soil and abroad. This taxation loophole hurts everyone and not just Uncle Sam’s wallet.
The current amount of money that the United States spends on foreign aid is in the ballpark of $15 billion per year. If just five percent of the lost revenue ($90 billion) was used for foreign aid, this would increase funding by around a third.
About a third of the money dedicated to foreign aid is used for health purposes abroad–directly improving and saving lives. The rest of the money could help fund critical social assistance programs here at home as well.
By allowing corporations to evade taxation, the United States loses 90 billion chances a year to spend money on foreign aid to help people abroad, fund critical programs to help the poor in the United States and virtually anything else that could need funding.
The opportunity costs of not closing these tax loopholes are enormous to people abroad and people at home. It is an insult to American citizens, and to the aid workers who need more funds to help the poor and simultaneously give these very same corporations more consumers to court in the long run.
– Martin Yim