This practice is just as relevant nine years later. Corporations abuse the accounting practice by shifting profits overseas to avoid U.S. taxes. Their prices are set artificially high for imports and low on exports. In the U.S., the corporations are allowed to claim the high expenses on the imports and the smaller profits on the exports in their IRS filings.
Profits earned through a foreign subsidiary of a U.S. corporation are not taxed until the cash is repatriated in a dividend back to the U.S. parent company. As a result, while the statutory federal corporate income tax rate stands at 35%, it is estimated that the effective tax rate of the largest publicly traded companies in the U.S. is closer to 20%.
Regardless of one's party affiliation, the very existence of the Ugland House appears indefensible.
Back to Nader: "Any significant push toward fundamental tax reform has to start by chipping away at the corporatized, commercial Congress which uses tax breaks, deferrals, credits and exemptions as inventory to sell for campaign cash in increasingly costly campaigns."
If the basic purpose of taxation is to raise revenue needed for public services. Why should hardworking citizens underwrite corporations who skate the tax code? How does filling the coffers of profitable companies who avoid taxes through a labyrinth of skillful tax avoidance -- including
Bank of America
(BAC - Get Report)
(GE - Get Report)
(ORCL - Get Report)
(CSCO - Get Report)
(MSFT - Get Report)
and so many other companies -- and their ridiculously high-paid executives benefit the lives of everyday citizens?
At most large multinational U.S. corporations the tax department is a well-oiled and systematic profit center. In 2010 GE earned $7 billion in the U.S. but paid no federal taxes to the U.S. government. Verizon and Bank of America didn't pay federal taxes either. Yet all three companies were provided with the resources, public services and infrastructure to conduct their business.
By most estimates over $1 trillion of profit earned by U.S. companies sits in offshore cash and short-term investments in offshore holding companies and has never been taxed by the U.S. Two conspicuous examples include Microsoft and Apple, which hold $50 billion and $100 billion in cash, respectively, in offshore accounts.