Bermuda Cited In US Tax Avoidance Report

April 6, 2013

The use of what it calls  ”foreign tax havens” — including Bermuda — is costing the US $150 billion per year in the form of lost tax revenues, according to academic studies cited by a report from the Washington-based US Public Interest Research Group [PIRG] released on Thursday [Apr. 4].

Corporations account for $90 billion of the lost revenue, and individuals make up the other $60 billion.

Offshore tax avoidance has become a hot-button issue of late, after a September US Senate report alleged Apple, Google and Microsoft moved profits overseas in an effort to legally dodge US taxes.

Overall, US companies are now holding a record $1.9 trillion of their profits abroad, according to a recent Bloomberg report.

In December, Bloomberg’s Jesse Drucker reported that Google avoided paying $2 billion in global income taxes by moving $10 billion in revenue, or 80 percent of its pretax profit, to Bermuda, which does not have a corporate income tax. He noted that Google has nearly doubled the amount of money it is sheltering in Bermuda since 2008.

The average taxpayer in 2012 would have to shoulder an extra $1,026 in taxes to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals according to PIRG

The average small business would also have to pay $3,067 to cover the cost of offshore tax avoidance by large corporations.

The news about the $150 billion cost to US taxpayers over big corporations’ tax avoidance comes as Americans are facing $85 billion in across-the-board federal budget cuts in 2013.

“As this [PIRG] timely report shows, tax haven abuse takes an immense toll on the vast majority of American taxpayers who don’t employ armies of lawyers and accountants to avoid paying the taxes they owe,” said US Senator Carl Levin, who has led the fight in Congress against offshore tax dodging and has introduced legislation to close corporate tax loopholes. “We can no longer afford the damage these abuses do to the federal budget, and American families and businesses can’t afford to carry the burden of a privileged few who use egregious loopholes to avoid paying taxes.

“It is time to close these loopholes, reduce the deficit, protect important investments in our future and bring some fairness back to the tax code.”

Offshore tax havens also give large multinationals a competitive advantage over responsible small businesses which don’t use tax havens and get stuck footing the bill for corporate tax dodging, said a small business owner quoted by consumer advocacy organisation PIRG.

“While I’ll be paying my taxes – investing in the public infrastructure and services that underpin our economy – many profitable large corporations will be paying a lower tax rate than me or not paying taxes at all,” said Joseph Rotella, the owner of Spencer Organ Company, a small business in Waltham, Massachusetts. “That puts small businesses at a competitive disadvantage and undermines our nation,” he added.

Scott Klinger, the Tax Policy Director of the American Sustainable Business Council and Business for Shared Prosperity, which represents more than 165,000 business owners throughout the United States, also commented on the report’s findings. “Joseph is far from alone in his concern. Using offshore tax loopholes to avoid paying taxes is not a Democrat or Republican issue. It is a serious business issue, and one of great importance to Main Street business owners, regardless of their political affiliation.”

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  1. “New York Times” Op-Ed Cites Bermuda | Bernews.com | April 12, 2013
  1. swing voter says:

    The US definitely need the tax revenue and the drumbeat gets louder. BDA would be wise to create another money making gimmick similar to IB very very fast

    • EZ says:

      No, what the US “needs” is to reduce (and make more efficient) the always-increasing, bloated, wasteful, and corrupt government bureaucracy, reduce the need for continual higher taxes and economy-crushing deficit spending by eliminating agencies and departments that usurp powers not enumerated by our Constitution, and free up the markets from overburdening regulations that only serve to crush the entrepreneurial spirit of current and future business owners.

      Because of Obamacare alone, I will lose over $400 a month in income (pretty much my entire above-expenses cushion) when my employer will be forced to drop my (and hundreds of other employees) hours worked below 30 so that they are not forced to waste their hard-earned (and slim) profit margins on nationalized (unconstitutional — I don’t care what those Supreme Court HACKS say) “healthcare”.

      The only reason the Federal Government thinks they “need” more tax revenue, is because they are too damned stupid to function efficiently and there is NO accountability. Most of the Government agencies would FAIL to exist if they had to be self-sustaining as any other BUSINESS must do to stay open.

      The U.S. Postal Service is a prime example of a Government agency who HAD the potential to be self-sustaining without external tax revenue, but couldn’t because of open market competition and better business practices by their free-market competitors. Their poor business practices against competing private companies are what is causing them to FAIL and they would have been completely eradicated a long time ago except for being propped up by federal tax dollars at OUR expense (just ANOTHER agency “too big to fail”? I say LET THEM FAIL and let me keep my money so I can spend it how I choose!).

      Privatize ALL Government agencies (or make them ALL strictly supported on a volunteer-only basis) and see which ones we actually “need”. It won’t be many, that’s for sure, and the ones that rise above the rest do so because We The People either support it by volunteering our own labor and time or we actually CHOOSE which ones to support with our dollars, not via some so-called proxy “representation” of the entire constituency (what a JOKE). The latter just leads to heavy taxation to pay for crap we would never choose to pay for/fund with our own dollars and conscience.

      This may have been a decent idea taking into consideration the population of America in 1776, but this nation has WAY too many people in it now to be “represented” by so few at the federal level.

      Today, there is no longer a similar level of representation as there was at the founding, and as such, the balance of power that once existed is now in the hands of entirely too few politicians which cannot possibly represent the constituency with any degree of accuracy.

      Am I saying we need more politicians? Scary to think, BUT if these “positions of power” were not paid positions but voluntary, and elected officials had to support themselves in other ways (via the private sector) than dipping their fingers in the federal tax pool, then yes, I think more politicians equalling more representation may be a good way to go.

      Overall, I say, shrink Government spending while finding ways to keep it working more efficiently.

      This is what any good business would do.

  2. Verbal Kint says:

    I am not alone in thinking that Bermuda has painted itself into a corner. The prosperity built on tax advantage has been spent away and there is nothing to take the place of I.B. in the absence of that tax advantage.

  3. Building a better Bermuda says:

    There is caution going ahead, times are tough and we have many countries beating the drum of closing tax loopholes. To increase revenues This notion should be cautioned too. I agree that individuals hiding their monies overseas should be reigned in, but companies are another matter. If jurisdictions start closing the ability for companies to maximize their profits by decreasing their taxes, they may start finding that those companies will look to other was to do so, namely decreasing their employee base. I believe there is a similar example from about a decade ago, when Stanley looked to relocate it headquarters to Bermuda to increase their profit margin to compete in the international market and outrage by politicians put a halt to this. They called it unamerican and even got their employees to protest the choice, in the end Stanley opted to remain headquartered in the US and ended up eliminating jobs to achieve their margins.
    One of the things we need to remember, the US doesn’t just tax their companies on money they make in the US, but on money they make outside the US, how is that any more moral than compnies trying to avoid paying taxes on those monies, or taxing their citizens who haven’t resided in the US for years.

    • Raymond Ray says:

      I do believe that many of those complaining about “overseas tax havens” are also the same ones benefiting from the so called, “over seas tax havens” and to stop the access and the availability of such places will be like, “cutting off the nose to spite the face.” therefore are no-more than, “U.S.A.Govnt scare tactics”