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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region Forums2013: Corporate America increased profits by $93b; paid $15b less taxes
In July, the American pharmaceutical giant AbbVie, maker of the world's top-selling drug the arthritis treatment Humira reached a blockbuster deal to acquire European rival Shire, best known for the attention-deficit medication Adderall. The merger was cheered by Wall Street, not for what the deal will do to advance pharmaceutical science, but because it will empower the bigger firm, AbbVie, to renounce its U.S. citizenship.
At $55 billion, the AbbVie deal is the largest in a cavalcade of corporate "inversions." A loophole in American tax law permits companies with just 20 percent foreign ownership to reincorporate abroad, which means that if a big U.S. firm acquires a smaller company located in a tax haven, it can then "invert" that is, become a subsidiary of its foreign-based affiliate and kiss a huge share of its IRS obligations goodbye.
AbbVie shareholders will continue to control 75 percent of the company, which will still be managed by executives outside Chicago. But the merged company will now file its tax returns on the island of Jersey a speck of land in the English Channel, where Shire is incorporated. AbbVie, which racked up more than $10 billion in Humira sales last year, will slash its effective corporate tax rate from 22 percent to 13. The cost to the U.S. Treasury? Possibly as much as $1.3 billion by the year 2020...
...These tax turncoats have drawn the ire of President Obama. "I don't care if it's legal," he declared this summer. "It's wrong." These inverted companies, he said, "don't want to give up?.?.?.?all the advantages of operating in the United States. They just don't want to pay for it..."
...Last year the IRS finally collected more in tax receipts than it did before the crash in 2007. But dig a little deeper into the numbers and it is clear we haven't returned to normal: Corporations paid nearly $100 billion less in federal income taxes last year than before the Great Recession down nearly 40 percent as a share of GDP. In fact, corporate profits and corporate tax collections are now trending in opposite directions. Profits were up $93 billion last year to a high of $2.1 trillion, according to the Commerce Department. Yet corporate tax payments actually fell last year by more than $15 billion.
How is this possible?
http://www.rollingstone.com/politics/news/the-biggest-tax-scam-ever-20140827
CrispyQ
(36,458 posts)The analysis reveals that the biggest names in corporate America are boycotting the U.S. tax system, en masse. Top offenders include giants from high-tech (Microsoft, $76 billion); Big Pharma (Pfizer, $69 billion); Big Oil (ExxonMobil, $47 billion); investment banks (Goldman Sachs, $22 billion); Big Tobacco (Philip Morris, $20 billion); discount retailers (Wal-Mart, $19 billion); fast-food chains (McDonald's, $16 billion) even heavy machinery (Caterpillar, $17 billion). General Electric has $110 billion stashed offshore, and enjoys an effective tax rate of four percent 31 points lower than its statutory obligation to the IRS.
"The things these companies are doing, 20 years ago would almost certainly have been illegal," says Bob McIntyre, president of Citizens for Tax Justice. "But now you've got so many big, powerful corporations doing it that it's the norm." Systematic avoidance helps explain why corporate income taxes one-third of federal revenue in the 1950s have now dropped below 10 percent of Treasury receipts today.