WASHINGTON: Foreign profits held overseas by US corporations to avoid taxes at home nearly doubled from 2008 to 2013 to top $2.1 trillion, said a private research firm’s report, prompting a call for reform by the Senate’s top tax law writer.
“The new numbers ... certainly highlight what is one of the key challenges for tax reform. I do think there need to be some reforms in this area,” Senate Finance Committee Chairman Ron Wyden told reporters on Tuesday on Capitol Hill.
Under US law, corporations do not have to pay income tax on most of their overseas profits until they are brought into the United States. These earnings can be held offshore for years if they are classified as indefinitely invested abroad.
Research firm Audit Analytics said in a report issued last week that the total of such earnings was up 93 percent from 2008 to 2013, citing federal financial filings for companies listed in the Russell 1000 index of US corporations.
Conglomerate General Electric Co had the biggest pile of earnings stored abroad, at $110bn, the firm said. Next were software maker Microsoft Corp, with $76.4bn; drugmakers Pfizer Inc, with $69bn, and Merck & Co Inc, with $57.1bn; and high-tech group Apple Inc, with $54.4bn, it said.
In response, GE said in a statement: “GE operates in more than 170 countries, and most of these overseas earnings have been reinvested in active business operations like manufacturing facilities and loans to non-US customers.”
A Merck spokesman said the company files its tax returns in accordance with all applicable laws and regulations.
A Microsoft spokesman referred questions to 2012 congressional testimony, in which company officials said it abides by foreign and US tax laws.
In testimony in 2013 before Congress, Apple Chief Executive Tim Cook said the company is a large taxpayer and does not use tax gimmicks. Apple declined to comment on the new report.
Pfizer was not immediately available for comment.
Congress has quarrelled for years over the law that lets multinationals stash profits abroad tax-free. Some favour killing the law, known as offshore corporate income tax deferral, and some back a one-time tax holiday that would let companies bring foreign profits home, or “repatriate” them, at a low tax rate.
Debate over offshore deferral flared again in November when Wyden’s predecessor as finance committee chairman, former Democratic Senator Max Baucus, proposed doing both. Baucus resigned weeks later to become US ambassador to China. Wyden in the past has called for repeal of offshore deferral, along with a repatriation holiday, among other changes to the tax code. Reuters