Quick Hit Ellyn Fortino Friday November 4th, 2016, 4:30pm

U.S. Multinational Companies Owe $700 Billion In Taxes On Offshore Profits, New Research Shows

American multinational corporations are apparently dodging nearly $700 billion in U.S. taxes they owe on profits stockpiled offshore, according to a new "corporate tax chartbook" from Americans for Tax Fairness (ATF) and the Economic Policy Institute (EPI).

Last year, Fortune 500 companies had $2.4 trillion in untaxed offshore profits, on which they owe up to $695 billion in U.S. taxes, the analysis found.

"Corporations have not paid any U.S. taxes on these profits because our tax system lets them defer paying taxes until that income is brought back to the U.S. parent corporation (i.e., repatriated)," the report states.

This deferral process costs the U.S. Treasury roughly $126 billion annually or $1.3 trillion over a decade. 

"This intentional erosion of the U.S. corporate income tax base has real consequences," the researchers wrote. "Rich multinational corporations avoiding their fair share of U.S. taxes means that domestic firms and American workers have to foot the bill. It also means that corporations are not paying their fair share for our infrastructure, schools, public safety, and legal systems, despite depending on all of these services for their profitability."

About 55 percent of U.S. corporate offshore profits are stockpiled in "tax-haven countries," the chartbook found. On average, corporations pay tax rates between 3 percent and 6.6 percent on their profits booked in such places.

"There is a staggering -- and growing -- amount of money being held offshore," said EPI budget analyst Hunter Blair. "Corporate tax avoidance simply must be addressed, and not by a tax holiday. The corporate income tax brings in two-thirds less revenue than it did 60 years ago, despite sky high corporate profits. These large multinational corporations can certainly afford to pay the taxes they owe."

Corporate profits as a share of the economy have soared from 5.5 percent in 1952 to 8.5 percent in 2015. At the same time, corporate taxes as a share of the economy dropped from 5.9 percent to 1.9 percent.

"Corporations used to contribute $1 out of every $3 in federal revenue," the report states. "Today, despite very high corporate profitability, it is $1 out of every $9."

The full statutory corporate tax rate is 35 percent, but few major firms actually pay that much. Effective corporate tax rates are estimated to be about half of the official 35 percent rate, according to the data.

The report's findings make the case against giving further tax breaks to corporations, the researchers argue.

"The facts show that corporate America is not over taxed and, in fact, goes to extraordinary lengths to avoid paying what they owe," said ATF Executive Director Frank Clemente. "We hope this book of data can help change the false narrative on taxes peddled by wealthy corporations and their allies in Washington."

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