Tax Haven Use on the Rise

A report by the Congressional Research Service (CRS) has found that U.S.- based companies are increasingly shifting profits into tax havens. The CRS analyzed profit data from multinational companies and compared reported profits and other business activity in lower-tax jurisdictions versus higher-tax countries like the United Kingdom and Canada.

The report found that significant shares of profits are being reported in tax preferred countries and that these shares are disproportionate to the location of the firm’s business activity as indicated by where they hire workers and make investments. For example, American companies reported earning 43% of overseas profits in Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland in 2008, while hiring 4% of their foreign workforce and making 7% of their foreign investments in those economies. In comparison, the traditional economies of Australia, Canada, Germany, Mexico and the United Kingdom accounted for 14% of American MNCs overseas’ profits, but 40% of foreign hired labor and 34% of foreign investment.

More News

• IRS continues to pursue foreign banks for disclosure of US account holders
• IRS releases guidance postponing Form 8938 filings for domestic entities
• Fiscal Cliff: The International Fallout