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Foreign Tax Havens Costly to U.S., Study Says
By
LYNNLEY BROWNING
America's biggest corporations are increasingly funneling profits earned in the United States to tax havens around the globe, depriving the United States Treasury of anywhere from $10 billion to $20 billion in lost tax revenue each year, according to a new study. The study, to be published today in the trade journal Tax Notes, says that United States multinational corporations shifted $75 billion in domestic profits last year to no-tax and low-tax foreign havens like Bermuda and Ireland. The study's author, Martin A. Sullivan, said that legal loopholes and tax credits could mean in theory that no taxes are owed to the United States government on the shifted income. But he wrote that the shifting is more likely to result in annual tax losses to federal coffers of $10 billion to $20 billion. He said yesterday that at least some of the transfer probably occurred through questionable tax shelters. In a related study, published by Tax Notes earlier this month, Mr. Sullivan concluded that that profits reported by American multinational companies from their foreign subsidiaries, and not from their operations based in the United States, soared 68 percent since 1999, to $149 billion last year. The earlier study said that the rise in foreign earnings was not accompanied by any gain in real economic activity in the tax havens, suggesting that multinationals were increasingly using offshore tax shelters to shield earnings.
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