Use of tax havens by U.S. global companies on the rise-report

Tue Jan 29, 2013 11:35am EST
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By Kim Dixon

WASHINGTON Jan 29 (Reuters) - U.S.-based global companies are increasingly shifting profits into tax havens like Bermuda and Switzerland, a government report said, a finding likely to fuel debate over the taxes corporations pay and their flexibility in locating profits.

The Congressional Research Service 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.

Among the findings: American multinational companies reported 43 percent of their overseas profits in the tax havens studied - Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland - in 2008, the most recent year data was available.

At the same time, these same companies hired only 4 percent of their foreign workforce and made just 7 percent of their foreign investments in these same countries.

"By all indicators examined in this report, profit shifting has generally trended upward over time," the report, dated Jan. 18 said.

The analysis found this trend increasing since 1999.

CRS, a nonpartisan research arm of Congress used by lawmakers, analyzed data compiled by the Bureau of Economic Analysis, a unit of the Commerce Department that collects economic data from non-financial companies with foreign affiliates.

U.S.-based corporations have griped for years about paying what is now the steepest corporate tax rate among all industrialized countries. At the same time, U.S. companies do tend to enjoy more generous tax breaks, including deductions and various loopholes.   Continued...