It’s almost Tax Day (Apr. 18) in the US and many Americans are preparing to write checks to Uncle Sam. But many would argue not everyone pays their fair share, especially some of the nation’s wealthiest businesses, which hold profits offshore to avoid being taxed.
At the end of 2014, the 50 largest US companies held a combined total of nearly $1.4 trillion dollars offshore, which is more than the entire gross-domestic product of Mexico, shows a report released today by Oxfam.
Those offshore holdings helped lower the combined effective global-tax rate for those companies from 35%—the rate US corporations are required to pay on their profits—to 27%, according to the report.
The biggest offshore hoarders were consumer-technology giants like Apple, Microsoft, IBM, and Google, as well as General Electric and pharmaceutical conglomerates such as Pfizer, the data showed.
All of those companies do substantial business overseas, and it’s more cost-effective for them to leave the funds abroad.
US corporations pay a 35% tax on all profits from around the world, but only after the money is repatriated to the US. But they can still leverage assets held offshore in the US by borrowing domestically against them. And there are other ways of lowering taxes, like exploiting loopholes and reincorporating in low-tax regions, through what’s known as tax inversions.
Just six of the largest 50 US companies—ConocoPhillips, Chevron, Exxon Mobil, CVS Health, UnitedHealth Group, and Home Depot—had an effective tax rate of 35% or more from 2008 to 2014. (Walt Disney and Comcast came close to reaching that threshold.) Meanwhile, companies including General Electric and Morgan Stanley had effective tax rates in the single digits.