When High Tech means low tax

The U.S. government wants corporations to pay taxes because that’s where the money is. But corporations would rather not pay it and prefer to pass the tax burden onto others. And one way they avoid paying is by deferring the tax on their offshore income.

Recently the Apple Corporation generated some bad publicity when the Senate Permanent Subcommittee on Investigations held a hearing on Offshore Profit Shifting and the U.S. Tax Code. When it was revealed that the computer company had dodged many billions in taxes by deferring income offshore, Apple offered the outlandish defense that it could have dodged a lot more if it was truly greedy.

But Apple is unusual among high-tech companies only in that it actually discloses that information. Some technology companies do disclose what their tax liability would be, but others don’t; neither Cisco, Google, Intel nor Hewlett-Packard revealed directly what they would pay. According to a recent report from the Citizens for Tax Justice, “It’s likely that hundreds of other Fortune 500 companies are also engaging in similar strategies to take advantage of the rule allowing U.S. companies to ‘defer’ paying U.S. taxes on their offshore income.”

But through other mandatory revelations on their annual reports CTJ found that they all have money in known tax havens. For instance, Cisco Company has some $41 billion in “unrepatriated” around the world. As a result, said CTJ, “... some of these companies have managed to avoid virtually all taxes on these profits.”

High tech is only one sector of the Fortune 500 that engages in offshoring and non-disclosure. It’s difficult, if not impossible, to estimate just how much the U.S. is losing to these practices. But Citizens for Tax Justice said “... if these companies paid at the same 28 percent average tax rate as the 55 disclosing companies, the resulting one-time tax would total $363 billion for these 235 companies.”

The CTJ report doesn’t indicate whether technology companies as a group are any more or less tax-avoidant than other industries. But as visible, global leaders, they have perhaps a greater obligation to adhere to social standards. High-tech benefits from the security, the education system, the immigration controls and countless other benefits that U.S. residents pay for. Yet when it comes to paying for these necessities, theses companies not only refuse, they refuse to even admit it. You have to admire their nerve, if not their ethics.

Speed Matters believes all of us should pay a fair share of the tax burden.

Offshore Profit Shifting and the U.S. Tax Code (Senate Permanent Subcommittee on Investigations, May 21, 2013)

Apple Is Not Alone (Citizens for Tax Justice, Jun. 2, 2013)