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Apple defends tax setup amid reports: 'Paradise Papers' reveals multinationals' tactics as GOP aims for corporate rate cut

Don Lee, Los Angeles Times on

Published in Science & Technology News

WASHINGTON -- For years, Apple and other multinational firms have faced inquiries from government authorities about tactics they employed to lower their tax bills.

Now, new published reports show just how some of these global corporations tapped elite tax specialists to devise clever strategies, including island havens and secretive shell companies, to avoid paying billions of dollars into government coffers.

The disclosures contained in the so-called Paradise Papers -- documents and corporate records primarily from Bermuda-based law firm Appleby -- immediately added fuel to the debate over the GOP's tax proposal released last week, which includes slashing the corporate tax rate to 20 percent from 35 percent.

"We are all bearing witness to the consequences of Congress' failure to address offshore tax haven abuse," said Gawain Kripke, policy director for Oxfam America. "Yet congressional leaders are charging forward with a tax bill which has as its primary feature a massive windfall for offshore tax dodgers."

The international antipoverty organization called for an immediate pause on the Republican tax bill and an investigation into the activities revealed by the Paradise Papers.

Apple, in response to reports based on the documents, on Monday defended its tax payments, saying the maker of iPhones is the largest taxpayer in the world and that the company "pays every dollar it owes in every country around the world."

While critics have decried the Republican tax bill as a corporate handout, others argue that a tax overhaul is needed precisely because of the current system. They say the 35 percent tax rate leaves U.S. companies at a disadvantage against foreign rivals and motivates corporations to set up complex tax structures to reduce their tax burden, as well as to stash international profits abroad.

American businesses have long complained that the U.S. corporate tax rate is the highest among advanced economies, but the reality is that many American multinationals pay a much smaller percentage. The tax code is rife with many exemptions and special provisions, and tax lawyers and advisors have come up with creative methods to exploit loopholes in the system.

The result is that more than $100 billion in corporate tax revenue is lost annually by the U.S. government, according to analysts' estimates. And while the American statutory corporate tax rate is among the highest, total U.S. corporate taxes collected, as a percentage of the economy, is about average for developed countries.

The House GOP tax plan would allow multinational companies to bring home an estimated $2.6 trillion parked in offshore entities at a rate of 12 percent or lower. Even so, tax policy experts doubt that the tax proposal would discourage U.S. firms from going abroad or their penchant for devising tax shelters.

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