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Report: $190 Billion Lost to Offshore Tax Dodges

According to the new report The Hidden Cost of Offshore Tax Havens, tax systems in the U.S. lose nearly two hundred billion dollars each year to the offshore loopholes. Graphic courtesy of U.S. PIRG.
According to the new report The Hidden Cost of Offshore Tax Havens, tax systems in the U.S. lose nearly two hundred billion dollars each year to the offshore loopholes. Graphic courtesy of U.S. PIRG.
February 11, 2013

FRANKFORT, Ky. - Offshore tax havens are blowing a huge hole in state and federal tax systems, according to a new report, which puts the total revenue lost at almost $200 billion dollars a year. That's enough to not only stop the automatic federal spending cuts threatened for March 1, but also to cover all state and local firefighting budgets nationwide for a year.

Dan Smith wrote "The Hidden Cost of Offshore Tax Havens" for the watchdog organization U.S. PIRG (Public Interest Research Group), where he is a tax and budget advocate. He said they estimate the United States loses $150 billion a year, and states lose another $40 billion, including $380 million to Kentucky.

"It's not a victimless offense," Smith charged. "The winners are the big banks, pharmaceuticals and high tech companies. And the losers are small businesses and ordinary taxpayers."

Defenders of the tax havens say they help firms dodge a high corporate income tax rate, and that companies might relocate if the loopholes were closed. But Smith argued that few companies pay the full corporate tax rate. And he said they're unlikely to leave the U.S., because the work is done here and the products are sold here.

Smith said many corporate subsidiaries are little more than a complicated legal fiction. Products might be created and sold in the U.S., but the profits can magically bounce around the world before ending up in a Caribbean PO box.

"In the Cayman Islands there is actually a single building, five stories tall, that has nearly 19,000 corporate headquarters registered to it," he asserted.

At $380 million in annual revenue lost from individual and corporate income taxes, the report ranks Kentucky 26th among the states. California is at the top of the state list, losing more than $7 billion a year in tax revenue.

The report is at USPIRGEdFund.org.

Greg Stotelmyer , Public News Service - KY