WASHINGTON, D.C. – Following an uptick in corporations changing their address for tax purposes in order to avoid paying U.S. taxes, U.S. Sens. Sherrod Brown (D-OH) and Dick Durbin (D-IL) announced new legislation requiring corporations to “Pay What You Owe Before You Go” – settling their U.S. tax bill before relocating to a foreign country.
“Everyone knows that before you leave a restaurant you have to settle your tab,” Brown said. “Corporations shouldn’t get to play by different rules. While it is critical that we reach a long-term solution that reforms our international corporate tax code by implementing a global minimum tax and reducing the statutory tax rate, this bill is an immediate, commonsense measure to ensure businesses settle up before leaving the U.S.”
“When individuals decide to renounce their U.S. citizenship, they must pay their tax bill before they leave. Corporations should do the same,” said Durbin. “This measure will require corporations to pay their tax bill before they leave the country, preventing them from sticking the rest of us with their bill, and protecting taxpayers while Congress works toward comprehensive tax reform.”
Increasingly, corporations are using accounting gimmicks and tax loopholes to make a foreign country their new home for tax purposes. This maneuver is called an inversion. When multinational corporations invert, they permanently avoid U.S. tax on billions of dollars in foreign profits. The Pay What You Owe Before You Go Act of 2014 would require these corporations to settle up their U.S. tax bill before they declare residency in a new country. U.S. Rep. Lloyd Doggett (D-TX- 35) introduced companion legislation in the House.
According to research firm Audit Analytics, more than 500 American companies held $2.1 trillion in overseas assets in 2013. Below is a table of the top 50.
Company |
Deferred Profits (2013) |
General Electric Company |
$ 110,000,000,000 |
Microsoft Corporation |
$ 76,400,000,000 |
Pfizer, Inc. |
$ 69,000,000,000 |
Merck & Co., Inc. |
$ 57,100,000,000 |
Apple Inc. |
$ 54,400,000,000 |
International Business Machines Corporation (IBM) |
$ 52,300,000,000 |
Johnson & Johnson |
$ 50,900,000,000 |
Cisco Systems, Inc. |
$ 48,000,000,000 |
Exxon Mobil Corporation |
$ 47,000,000,000 |
Citigroup Inc. |
$ 43,800,000,000 |
Procter & Gamble Co. |
$ 42,000,000,000 |
Google Inc. |
$ 38,900,000,000 |
Hewlett Packard Company |
$ 38,200,000,000 |
PepsiCo Inc. |
$ 34,100,000,000 |
Chevron Corporation |
$ 31,300,000,000 |
The Coca-Cola Company |
$ 30,600,000,000 |
JPMorgan Chase, & Co. |
$ 28,500,000,000 |
Oracle Corporation |
$ 26,200,000,000 |
Amgen, Inc. |
$ 25,500,000,000 |
United Technologies Corporation |
$ 25,000,000,000 |
Abbott Laboratories |
$ 24,000,000,000 |
Bristol-Myers Squibb Company |
$ 24,000,000,000 |
Eli Lilly and Company |
$ 23,740,000,000 |
The Goldman Sachs Group, Inc. |
$ 22,540,000,000 |
Qualcomm Inc. /DE/ |
$ 21,600,000,000 |
AbbVie |
$ 21,000,000,000 |
Medtronic, Inc. |
$ 20,499,000,000 |
Intel Corporation |
$ 20,000,000,000 |
Phillip Morris International Inc. |
$ 20,000,000,000 |
Wal-mart Stores, Inc. |
$ 19,200,000,000 |
Dell Inc. |
$ 19,000,000,000 |
Apache Corporation |
$ 17,000,000,000 |
Caterpillar Inc. |
$ 17,000,000,000 |
Bank of America Corporation /DE/ |
$ 17,000,000,000 |
The Dow Chemical Co. /DE/ |
$ 16,139,000,000 |
McDonalds Corporation |
$ 16,100,000,000 |
E. I. du Pont De Nemours and Company |
$ 15,978,000,000 |
eBay, Inc. |
$ 14,000,000,000 |
Honeywell International, Inc. |
$ 13,500,000,000 |
Corning Incorporated /NY/ |
$ 12,400,000,000 |
Mondelez International, Inc. |
$ 12,400,000,000 |
Baxter International, Inc. |
$ 12,200,000,000 |
Boston Scientific Corporation |
$ 11,902,000,000 |
Danaher Corporation /DE/ |
$ 10,600,000,000 |
Occidental Petroleum Corporation /DE/ |
$ 10,600,000,000 |
Eaton Corporation PlC |
$ 10,500,000,000 |
EMC Corporation |
$ 10,200,000,000 |
Kimberly Clark Corporation |
$ 9,800,000,000 |
3M Company |
$ 9,700,000,000 |
American Express Company |
$ 9,600,000,000 |
Brown, a member of the Senate Finance Committee and a senior member of the Senate Banking Committee, has repeatedly urged Congress to address inversions and take immediate action to address the broken corporate tax code. In June 2013, Brown submitted a plan to the Senate Finance Committee that would increase American competiveness by overhauling the corporate tax code in order to promote investment in the United States. Brown argued that tax reform must ensure that our nation secures its fiscal future while addressing the challenges of an increasingly globalized economy. Currently, U.S. multinational corporations book over 40 percent of their profits in so-called “tax havens” that contain seven percent of their actual foreign investments and four percent of their foreign workers. For example, the profits of U.S. controlled foreign corporations booked in Bermuda represent 646 percent of that nation’s Gross Domestic Product (GDP).
Brown’s plan would simplify an overly complex international tax system that fails to encourage domestic investment and allows companies to shift domestic profits to tax havens. Specifically, Brown’s plan would:
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