Archives

NC Budget and Tax Center

Microsoft, the software titan familiar to most Americans, has benefited handsomely from using loopholes in the federal tax code to avoid paying its fair share of corporate income taxes. The corporation has avoided paying $4.5 billion in U.S. income taxes in recent years, according to evidence presented by the Senate Permanent Subcommittee on Investigations (PSI).

To avoid paying income taxes, Microsoft “sold” the right to market its products in the Americas to an offshore subsidiary, which then “licensed” back to the parent company the right to sell its products in the United States. The effect was that in 2011, almost half of the value of Microsoft’s U.S. sales was channeled offshore, and through this “transfer-pricing” shell game the company avoided $4.5 billion in U.S. income taxes over three years.

Senator Carl Levin’s Stop Tax Haven Abuse Act (S. 1533) bill would close two tax loopholes that corporations use to shuffle their intangible property, like licenses and patents, to offshore subsidiaries and dodge paying the taxes they owe. Closing these two loopholes would raise $23 billion in revenue over 10 years. Eliminating such corporate tax loopholes represents a positive step forward in ensuring that profitable corporations such as Microsoft, among others, pay their fair share of taxes.

NC Budget and Tax Center

As I explained in this space yesterday, the federal budget process would become a bit more stable and predictable if the recently introduced Stop Tax Haven Abuse Act is enacted. This bill would raise at least $200 billion over the next 10 years by closing corporate tax loopholes that enable multinationals to shield their offshore profits from taxation. Once federal lawmakers deal with the current budget shutdown, the passage of this act would deliver a more balanced approach to addressing the federal deficit. Above all, it would prevent a second round of across-the-board cuts that will only further harm the nation’s most vulnerable citizens at a time when hardship remains high.

One of the four major reforms within the bill is to repeal the “check the box” rule that allow companies to use offshore subsidies as a front to avoid paying their fair share of taxes, saving an estimated $78 billion. Currently, businesses can make offshore subsidiaries and their passive income invisible for tax purposes. Read More

Uncategorized

April 15Suggested readings for Tax Day 2013:

Joseph Stiglitz in the New York Times on “A Tax System Stacked Against the 99 Percent,”

Travis Waldron at Think Progress on “Five Ways the Tax Code Subsidizes the Wealthiest Americans,”

David Cay Johnston on the fast-shrinking budget of our national tax police, and, of course,

our own recent series – “Profiles in corporate tax avoidance” featuring profiles of Duke Energy, Merck & Co. and International Paper.

 

 

Uncategorized

As Brenna Burch reported here on The Progressive Pulse the other day, the state Court of Appeals issued a welcome decision this week when a three-judge panel ruled unanimously that the parent company of the grocer Food Lion (the Belgian corporation known as Delhaize) could not escape state taxes through various avoidance techniques.

This morning, the Greensboro News & Record has an on-the-money editorial about the same matter entitled “Bread and taxes.”

This is the excellent conclusion:

“Delhaize and Food Lion expressed disappointment with the decision and said they are reviewing options. Because Tuesday’s ruling was unanimous — Judges Donna Stroud and Doug McCullough joined Thigpen —  the N.C. Supreme Court does not have to hear an appeal.

It’s time to call the issue settled. Food Lion sought a legal means to reduce its state tax bite, as many companies would do. Its plan didn’t work. Now it should focus on continuing its record of good corporate citizenship, which includes paying its fair share of North Carolina taxes.”

You can read the entire editorial by clicking here.

Uncategorized

In response to this year’s push by the General Assembly to weaken the state’s safeguards against corporate tax dodging, the NC Justice Center recently launched a petition asking the General Assembly to adopt a key corporate tax reform that would nullify many of the strategies some corporations use to avoid paying state corporate income taxes.

From the petition:

But here’s the good news: there is a simple way for our policymakers in North Carolina to crack down on corporate tax dodging. All they have to do is require corporations to pay taxes on profits earned in states where they do business. This common-sense idea, called “mandatory combined reporting,” could raise up to $100 million each year in North Carolina.

In a report issued earlier this year, the NC Budget and Tax Center described how large corporations are able to take advantage of tax shelters because most of them are structured as parent corporations that each own many separate subsidiary corporations operating in many states. In states without mandatory combined reporting, multi-state corporations are able to shift income earned in one state to related corporate subsidiary in a state without a corporate income tax or with special corporate tax exemptions. Read More