Offshore Tax Havens

A Washington DC business tax attorney provides assistance to companies in ensuring they are in compliance with tax obligations as well as in taking legal steps to reduce the amount of taxes owed to the government.

Many companies, including some of the largest businesses in the world, take steps to reduce the amount of taxes owed. In fact, a new report has revealed that the majority of companies on the Fortune 500 list are making use of offshore tax havens in order to reduce the amount of taxes that must be paid to the government of the United States.

The Majority of Fortune 500 Companies are Using Offshore Tax Havens

According to recent research about the use of offshore tax havens by Fortune 500 companies, approximately 366 of the 500 companies on the Fortune 500 list are making use of offshore tax havens. This means around 73 percent of companies — or close to three out of four companies — have at least some money kept offshore in order to avoid paying taxes to the U.S. government.

Collectively, the Fortune 500 companies now have a total of $2.6 trillion dollars in offshore accounts. The unpaid amount of U.S. tax that is being avoided because the companies have their money offshore totals an estimated $752 billion. 

Many of the Fortune 500 companies are able to legally keep their money offshore by maintaining tax haven subsidiaries. In fact, altogether, the 366 companies which are keeping their money offshore have at least 9,755 subsidiaries in tax havens. 

Companies are able to avoid paying U.S. taxes as a result of provisions within the tax code that make it permissible for businesses to indefinitely defer taxes on profits that were booked offshore.  These provisions within the tax code create a strong incentive for companies to shift profits to other countries where the tax rate is zero or where the tax rate is much lower than the corporate tax rate within the United States.

While the provisions that allow deferral of taxes for offshore profits make it legal for these companies to avoid paying taxes that are due, many experts refer to the actions of the companies that are keeping funds offshore as exploiting a loophole or gimmick in the tax code.  Some argue that tax reform should end this so-called “loophole,” and eliminate the efforts of companies to game the tax system.

However, these companies are simply acting rationally in light of the economic incentives created by the U.S. tax code and are aiming to ensure they can remain competitive even as the United States has some of the highest corporate tax rates in the developed world. 

Every business should have a tax strategy for making sure they are not paying more in taxes than is legally required — and for many companies, this strategy may involve keeping some assets offshore.  However, if your company has funds offshore and you want assistance making sure you are in full compliance with tax laws so you do not face potential legal consequences, you should reach out to Kevin Thorn, a Washington DC business tax attorney, for help as soon as possible.