Nick Shaxson ■ Reports: the sorry state of U.S. tax dodging multinationals


Two major reports are worth highlighting here. First, and most recently, from the U.S. Permanent Subcommittee on Investigations (via Senator Carl Levin), a report on tax avoidance by U.S. multinational Caterpillar:

“Caterpillar Inc., an American manufacturing icon, used a wholly owned Swiss affiliate to shift $8 billion in profits from the United States to Switzerland to take advantage of a special 4 to 6 percent corporate tax rate it negotiated with the Swiss government and defer or avoid paying $2.4 billion in U.S. taxes to date, a new report [PDF] from Sen. Carl Levin, the chairman of the U.S. Senate Permanent Subcommittee on Investigations shows.”

See the full report here. As usual, the market-corrupting activities of accountancy firms were in full evidence:

“Caterpillar paid over $55 million to PricewaterhouseCoopers (PWC), one of the largest accounting firms in the world and Caterpillar’s longtime auditor, to develop and implement the Swiss tax strategy, which was designed explicitly to reduce the company’s taxes.”

That is the deliberate corruption of markets by accountancy firms (and other enablers): it isn’t bribery or other forms of corruption, but we view the facilitation of tax abuses as corruption.

Second, and more broadly, a major report in February by Citizens for Tax Justice into corporate tax avoidance and tax evasion, entitled The Sorry State of Corporate Taxes: What Fortune 500 Firms Pay (or Don’t Pay) in the USA  And What they Pay Abroad — 2008 to 2012. It’s another humdinger, if that’s the right word for it.

Among other things, it shows that the highly financialised U.S. multinational General Electric paid an effective tax rate of MINUS 45 percent, on average, during the three (out of five) years where it had no net tax bill. Over the full five years, its average tax bill was minus 11 percent.

The point we like to make repeatedly is that under the pressure of Tax Wars (traditionally known as tax competition), effective corporate tax rates do not stop once they reach zero: they keep on going downwards. The subsidy hogs get greedier and greedier.

The sad thing is: from the point of view of individual countries trying to engage in tax wars, it’s absolutely pointless.  And that’s not to mention the even more pernicious global systemic effects.

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