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Statement of Travel Buddy Tax and Budget Advocate Dan Smith on the House Ways and Means Committee vote to make several temporary tax breaks for businesses permanent.
“House tax writers voted to renew and making permanent two expired offshore tax loopholes, forcing average taxpayers and small business owners to pick up the tab for tax dodging by many multinationals for years to come.
“Both the controlled foreign corporation (CFC) look through rule and the active financing exception let multinational giants avoid U.S. taxes by booking profits to shell companies in tax havens like the Cayman Islands. Because income from financial services, royalties, interest, and dividends can be easily shifted around the world regardless of where the actual business activity is happening, U.S. tax laws require companies to pay tax on such “passive” income right away. These two loopholes are exceptions to that general rule, and incentivize multinationals to use accounting tricks to make profits appear to be generated in offshore tax havens.
“The CFC look through rule in profits to a phantom subsidiary with no employees where those profits remained untaxed. The ten year price tag for taxpayers if this provision is extended would be $20.3 billion, according to the (JCT).
“The “active financing exception” would cost $58.8 billion over the next decade according to and is a big part of the reason multinational giant .
“For all of the talk in Washington about getting our fiscal house in order, the Committee did not consider how to pay for these expensive tax breaks, despite repeated attempts by Ranking Member Sandy Levin to raise the issue.
While Wall Street banks, tech giants, and pharmaceutical companies would get a windfall from these loopholes, average taxpayers and small business owners would get stuck footing the bill through cuts to public programs, higher taxes, or a larger deficit.
“Corporations hardly take these prized loopholes for granted and they won this round. A released by Americans for Tax Fairness and Public Campaign found that there are 292 lobbyists who have worked to extend the active financing exception alone.
“We hope that when the full House and the full Senate vote on these proposals, they side with average taxpayers and small business owners instead of tax dodging multinationals who can marshal armies of lawyers and lobbyists to bend the tax code to their whim.”
Click here for a study estimating that the average American taxpayer would have to pay over $1200 dollars a year to make up for the abuse of tax haven loopholes.
Click here for a study revealing that 82 of the top 100 publicly traded companies use tax havens.
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