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

Sources: Forbes, Bloomberg, RT, NPR
Photo: Nation of Change

Oxfam Cracks Down On Tax Dodging
On January 31, Oxfam came out with a statement revealing that a third of the unpaid corporate tax belonging to developing countries could end world hunger. The amount lost to corporate tax dodgers is estimated at around $160 billion, more than three times the $50.2 billion needed a year to end hunger globally.

Tax dodging practices are possible through a combination of legal and illegal activities such as tax havens, price manipulation across borders, and false invoicing. Oxfam has urged the UK government to close loopholes that allow corporate tax dodging to continue. Chief Executive of Oxfam Barbara Stocking, regarding UK Prime Minister David Cameron’s attendance at the U.N. high panel meeting last week, said that “David Cameron should be pushing for an end to global hunger by 2025, and an end to tax dodging which could pay for this and much more. These companies are effectively taking food from hungry mouths.”

A week before the U.N. high panel meeting, Cameron spoke at the World Economic Forum in Davos, Switzerland promising to prioritize tax evasion.“This is an issue whose time has come,” said Cameron. “After years of abuse, people across the planet are rightly calling for more action and most importantly there is gathering political will to actually do something about it.”

Oxfam was one of 100 organizations to launch the Enough Food for Everyone If campaign. The campaign plans to hold Cameron to his “commitment to lead the world in a battle against hunger.”

– Rafael Panlilio

Source: Gov.UKOxfam
Photo: Oxfam