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Offshore tax havens hurt U.S., W.Va., group says

CHARLESTON, W.Va. -- By transferring profits to subsidiaries in offshore tax havens, large corporations save about $90 billion in federal taxes a year, according to a new study just released by U.S. PIRG, a coalition of public interest research groups around the country.

The study -- "Offshore Shell Games: The Use of Offshore Tax Havens by the Top 100 Publicly Traded Companies" -- found every one of those top 100 companies used tax havens.

Fifteen of the companies held 66 percent of the $1.17 trillion in assets the 100 companies have deposited offshore.

"This is not just a federal problem that affects the federal budget," said Gary Zuckett, executive director of the West Virginia Citizens Action Group, the West Virginia affiliate of U.S. PIRG.

"Our state's corporate taxes are based in part on the federal returns filed by the corporations. These tax-dodging, offshore operations are also hurting West Virginia's bottom line.

"Those companies cost over $100 million to the West Virginia budget. That would go a long way to help us keep our budget balanced," Zuckett said. "It is not just a federal problem."

Back in February, U.S. PIRG reported West Virginia lost $106 million in taxes in 2012 from offshoring, while all states lost $40 billion.

Nationally, the two United States-based companies with the most offshore tax havens are Bank of America, which operated 316 offshore subsidiaries, and Morgan Stanley, which operated 200 of them, according to the new study.

Pfizer, the world's largest drug maker, ranked third with 174 subsidiaries based in tax havens including some in the Cayman Islands, Bermuda, Hong Kong, Ireland, Luxembourg, Panama, Costa Rica and the Netherlands.

"The company made more than 50 percent of its sales in the U.S. between 2010 and 2012," the new study reports. But Pfizer "managed to report no federal taxable income in the U.S. for the past five years."

Zuckett said lower federal tax revenues also have a major negative impact on states.

"Programs funded by federal taxes trickle down to the states. Now, they are talking about cutting back block grants to cities. That is all federal money.

"If the federal budget gets pinched by these companies not paying their fair share, the cuts that are made trickle down to states in several different budget lines," Zuckett said.

Zuckett said six firms with major operations in West Virginia -- Verizon Communications, DuPont Chemicals, NiSource Gas, American Electric Power, First Energy and General Electric -- paid no federal income taxes in at least one of the past four years.

"Offshore Shell Games" cites the Ugland House in the Cayman Islands as the perfect example of what is going on.

"Ugland House is a modest five-story office building in the Cayman Islands, yet it is the registered address for 18,857 companies," the report states.

"The vast majority of subsidiaries registered at Ugland House have no physical presence in the Caymans other than a post office box. About half of these companies have their billing address in the U.S." 

Reach Paul J. Nyden at pjnyden@wvgazette.com or 304-348-5164.


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