Big companies stash trillions of dollars offshore leaving the rest of us to pick up the tab, and now they are spending billions on lobbying to push for “reform” that will make things even worse. President Trump and leaders in Congress are proposing massive giveaways to the largest companies and cuts to lifesaving programs that help those who need them most.
The 50 largest US companies alone have $1.6 trillion stashed offshore, a $200 billion increase in a single year. Existing proposals from the leadership in the House of Representatives and President Trump will only make matters worse. The American people are tired of special deals that only serve the interests of groups with the highest paid lobbyists. As your constituent, I’m calling on you to reject rigged tax reform plans and start over with measures that protect working people and those living in poverty here in the US and around the world.
Oxfam’s report Rigged Reform analyzes the tax practices of the 50 largest public US companies, sheds light on just how rigged the tax system has become and describes how President Trump and the House GOP’s plans to “reform” the system will only make matters worse. This table shows how the top 50 US companies flex their political muscle and avoid paying taxes in the US and around the world. Rather than seeking a more level playing field on tax – both in the US and abroad- these companies are using their vast political influence to further tilt the rules in their favor.
|Company Name||Profits||Total Tax Expense||Cash Tax Paid||Federal Tax Expense||Global Effective Tax Rate||Tax "breaks"||Money Held Offshore||Number of Subsidiaries in Tax Havens||"Benefit from Trump Repatriation Plan"||"Benefit from Ryan Repatriation Plan"||Total Lobbying Spending||Tax Related Issues as a % of All Issues Lobbied||Tax Related Lobbying Spending||Lobby Coalition Membership|
|Total||$4,210,574.4 M||$1,088,822.9 M||$995,749 M||$560,573.2 M||25.9%||$423,166.7 M||$1,606,780.1 M||1751||$312,318 M||$327,934 M||$2,458 M||14%||$352.1 M||2.3 (Average)|
A dash (-) is used to denote amounts that unavailable or not applicable.
 AIG on Tax Haven Subsidiaries:
AIG responded: “While we are operating in the countries listed, most, if not all, of the income earned in these jurisdictions is subject to current U.S. taxation.”
 Bank of America on Cash Tax Paid:
Bank of America responded: “The period included in your analysis reflects the low point for the financial crisis and is not indicative of a normal environment. More recently, our tax payments have been reduced by net operating losses that arose during the financial crisis and tax credits we generated in those years but could not use, as well as other items. All things being equal, there should be less of a difference between cash tax and book tax expense going forward than there has been in the past.”
 Bank of America on Money Held Offshore:
Bank of America responded: “Virtually all of those earnings have been deployed in active businesses in the UK, Europe, and Asia – not in the Cayman Islands or ‘offshore tax havens.’ These earnings represent the regulatory capital of our foreign businesses so we could not bring those funds back without exiting or drastically downsizing those businesses, which would impact our ability to serve our clients.”
 Bank of America on Tax Haven Subsidiaries:
Bank of America responded: “While we do have business units in the Cayman Islands, all income that is earned by any Bank of America entities in the Cayman Islands is subject to current U.S. taxation.”
 ExxonMobil on Global Effective Tax Rate:
To calculate its effective tax rate, ExxonMobil uses income before tax including pre-tax equity company earnings (item C) instead of “income before income tax” from their Income Statement. ExxonMobil also includes its share of equity company taxes to calculate its effective tax rate instead of using “income tax provision” from its Income Statement. We did not alter our methodology for Exxon in order to remain consistent with our approach to the other 49 companies by taking the “income before income tax” and “income tax” figures directly from Exxon’s Income Statement without any manipulation.
 ExxonMobil on Money Held Offshore:
ExxonMobil responded: “This number corresponds to indefinitely reinvested undistributed earnings from subsidiaries outside the U.S. as of year-end 2015, which primarily relate to historic earnings from non-U.S. subsidiaries that have been retained by those businesses to fund historic and future capital expenditures.”
 ExxonMobil on Tax Haven Subsidiaries:
ExxonMobil responded: “ExxonMobil operates in dozens of countries all over the world. The corporate governance rules in these countries vary considerably. Where permissible, it is often prudent to incorporate an affiliate in a different country with stable and secure corporate governance rules (including countries that some refer to as ‘tax havens’). However, the affiliate pays taxes on any profits earned in a country where it operates to the government in that country, not in the country of incorporation.”
 GM on Federal Tax Expense:
General Motors filed for bankruptcy in June 2009 and was reorganized as a new entity with GM’s continuing operations, assets, and trademarks in July 2009. General Motor’s 2009 earnings, as reported on its financial statements, include $128 billion in debt cancellation income (“Reorganization Gains”) that arose from the bankruptcy. General Motors has characterized this income as “accounting-only, non-economic” and believes that “including it in profits would distort any tax ratio such as effective tax rate.” While recognizing these unique circumstances, we decided to maintain our methodology to remain consistent with our approach to the other 49 companies.
 GM on Tax Haven Subsidiaries:
GM responded: “GM does not have, nor use tax havens to reduce or avoid taxes. We do sell cars, parts, and auto financing in countries such as Caymans, Ireland, Switzerland, Luxembourg and the Netherlands, and we conduct those sales through GM-owned companies in those countries.”
 Merck on Total Lobbying Spending:
In 2009, the parent company Merck & Co. spent $6.41 million and its subsidiary Schering-Plough Corp. spent $1.81 million. Merck responded that the $1.81 million spend by Schering-Plough Corp. should not be included in its lobbying total. However, in order to keep the methodology consistent with the other 49 companies, we have chosen to include all subsidiary spending in the total lobbying expenditures.
 Metlife on Tax “breaks”:
Metlife responded: “A portion of our U.S. tax liability is offset by tax credits. These tax credits are used exactly as Congress intended: to expand the supply of affordable housing ($2 billion) and to develop renewal energy projects ($3 billion) that mitigate climate change.”
 Metlife on Money Held Offshore:
Metlife responded: “This number includes amounts derived from a wide variety of tangible and intangible assets that must be reported for accounting reasons. Local regulators also require that a large portion of earnings be retained locally as a capital buffer to meet obligations to our customers.”
 Metlife on Tax Haven Subsidiaries:
Metlife responded: “MetLife does not shift income to tax havens. MetLife has hundreds of active businesses across more than 45 countries. The only entities that have operations or investments in ‘tax havens’ are structured so that their income is included on our U.S. tax return and subject to the U.S. 35% tax rate.”
 Phillips 66:
Financial information for Phillips 66 is aggregated from 2010 to 2015, not 2009 to 2015, because Phillips 66 was not spun-off from ConocoPhillips until 2012. In its first 10-K filing in 2012, Phillips 66 included its financial information from 2010 and 2011 when it was operating as a subsidiary of ConocoPhillips. Lobbying expenditures are aggregated from 2012 to 2015.
 Phillips 66 on Tax Haven Subsidiaries:
Phillips 66 responded: “For the period presented, we operated refining assets in Ireland and marketing locations in Switzerland that provided products to local markets. Singapore is a major trading center for petroleum, and we continue to have operations there that support our worldwide Refining and Marketing businesses.”
 Prudential on Cash Tax Paid:
Prudential responded: “In Prudential’s case, there were very significant deductions, losses, and credits that predated the periods being compared that were properly claimed in the years being reported, reducing cash tax payments in the US and abroad.”
 Verizon on Tax Related Lobbying Spending:
Verizon responded: “Not all tax issues were those that primarily benefitted the company. For example, Verizon lobbied for the Internet tax moratorium, which was made permanent about a year ago.”
 Walmart on Money Held Offshore:
Walmart responded: “The Company intends to permanently reinvest these amounts in our international markets. Walmart operates more than 6,300 stores in 27 countries outside the U.S.”
 Walmart on Tax Related Lobbying Spending:
Walmart responded: “Over the last six years, much of Walmart’s tax lobbying has centered on online retail sales tax collection as we look to level the playing field between online only and brick and mortar retailers. We’ve also engaged the federal government on several other tax issues unrelated to corporate income tax, such as payroll taxes, tax extenders, and other tax matters impacting our customers, like the timing of tax refunds and the Earned Income Tax Credit.”
Oxfam America – working with our research partner the Institute for Taxation and Economic Policy – collected data for each of the 50 companies to measure taxes paid, tax breaks, and lobbying expenditures. All of the information we present in this publication is based on publicly available data, mostly provided by the companies themselves in their 10-K filings with the SEC. This section describes the methodology for each of the nine metrics we present.
Oxfam America reached out to all companies named in this report to share the findings of our research prior to publication. Many of the companies responded to engage with us on our methodology or provide additional information, clarification or context. This report incorporates that feedback.
The amount paid in US taxes is made up of six metrics. Using the companies’ annual 10-K reports filed with the SEC, we calculated each company’s total profits, federal income tax paid and total tax expense, and cash taxes paid for the years 2009 to 2015. We then used the total profits and total tax expense to calculate the companies’ effective tax rate and the tax breaks they got compared to the statutory rate of 35%.
In the companies’ annual 10-K reports, the Income Statement provides a figure for “earnings before income taxes” that represents the company’s profits for income tax purposes. We added together “earnings before income taxes” for years 2009 through 2015 subtracting their earnings from non-controlling interest to calculate each company’s profits for this period.
In the 10-K reports, the Income Tax footnote to the financial statements provides the components of the company’s income tax or benefit, broken down by current and deferred amounts for federal income tax, state and local income tax and foreign income tax. We used both the current and deferred amounts for federal taxes to remain consistent with the companies’ own approach in presenting their tax figures on their Income Statements and calculating their effective tax rates. We calculated the total current and deferred federal income tax provision for each company from 2009 through 2015.
In the 10-K reports the Income Statement provides a figure for “income tax provision” which represents the company’s current and deferred income tax expense or benefit for federal, state and local and foreign taxes. We added together years 2009 through 2015 to calculate each company’s total tax provision for this period. We used “income tax provision” from the Income Statement and did not manipulate this figure by excluding deferred taxes to remain consistent with the companies’ own approach in presenting their tax figures and calculating their effective tax rates.
In the 10-K reports companies report their “Global Cash Taxes Paid” which is the amount of money they actually expended in that year for taxes. We added together years 2009 through 2015 to calculate each company’s actual tax payments for this period. As noted in the report, companies paid less in tax than they reported owing.
To calculate the overall effective tax rate, we divided the total tax expense by total profits from 2009 to 2015 for each company. This method aligns with the company’s own effective tax rate calculation in the 10-K reports. When aggregating the tax data for our time period, we calculated the effective tax rate for each company for every year from 2009 to 2015 and verified this calculation against the companies’ self-reported rates.
The “tax breaks” metric represents the amount the companies are underpaying in comparison to the amount they would pay at the full US statutory rate of 35% for corporate income tax. The “tax breaks” were calculated by multiplying a company’s total profits by 35% and subtracting ”tax expense” to determine the difference between the amount of tax paid and the amount of tax that should be paid at the full statutory rate.
To provide a fuller picture of these companies’ tax avoidance activities, we also sought to assess the companies’ efforts to avoid taxes by holding money offshore. We then assessed how much they would benefit from Trump and House GOP plans to lower the tax rate for repatriating these funds.
In the 10-K reports companies often disclose the amount of earnings held offshore in the Income Tax footnote to the financial statements. The total is generally labeled as earnings “permanently reinvested” in certain foreign subsidiaries. Although these earnings are not always held as cash or cash reserves and may actually be re-invested in the foreign subsidiaries at times, they are still earnings by US companies that are allowed to escape US taxation. Because most of the companies’ 2016 10-K reports had not yet been released at the time of this research, we used the companies’ 2015 10-K reports for consistency.
We focus solely on the benefits to companies that would accrue from tax breaks on their offshore earnings. We calculate the benefit by applying the difference between the rate companies disclose that they would owe if they repatriated their offshore earnings under current law to the rate in the Trump/House GOP proposals. President Trump has proposed a 10% repatriation rate and the House GOP plan offers a 8.75% repatriation rate for profits held in cash, and 3.5% for profits not held in cash. For the House GOP plan we estimate benefits as if all profits are held in cash because data is not available to disaggregate the two. Not all of the 50 companies disclose how much tax they would owe if they repatriated their profits under current law—they take advantage of a SEC rule that allows them to say it would be impractical to do so. For companies that do not disclose this information, we use the average rate of the companies that do disclose, which is 26.6%. The benefits we present, therefore, are estimates—the actual amount companies would save will depend on the details of any legislation passed as applied to companies’ specific financial holdings.
The calculation we use is as follows:
Earnings held offshore x (Repatriation tax rate under current law – proposed repatriation tax rate under Trump/House GOP plans) = Estimated Benefits
To determine the number of subsidiaries, our research team used Exhibit 21 of corporations’ 2015 10-K reports to determine how many subsidiaries were disclosed by the companies and where they were located. We classified 50 jurisdictions as tax havens using three sources with consistent definitions of tax havens: “the Organization for Economic Co-operation and Development (OECD), the National Bureau of Economic Research, and a US District Court order.”
The Exhibit 21 subsidiary disclosures only include “significant subsidiaries.” This standard only requires companies to disclose subsidiaries where either 1) the investment in the subsidiary constitutes more the 10% of the corporation’s total consolidated assets or 2) the income from the subsidiary exceeds 10% of the corporation’s total consolidated income.
A tax haven subsidiary does not always constitute a shell company established solely for tax and secrecy purposes, and many companies justify the location of subsidiaries in tax havens by demonstrating that they have active businesses in these jurisdictions. However, it is clear that, as a group, US multinationals use the networks of offshore subsidiaries to utilize the lenient regulations and added secrecy of the offshore jurisdictions and the loose US standards for “locating” a subsidiary in a jurisdiction. They are able to report higher earnings in their offshore subsidiaries to take advantage of the low or zero tax rate while avoiding taxes elsewhere.
To determine the lobbying expenditures of the target companies, we used the Center for Responsive Politics’ website Opensecrets.org. This resource calculates the total lobby expenditure for a company and its affiliates using lobbying data released by the Senate Office of Public Records. For each company, we added together their total lobbying expenditure for the seven years from 2009 to 2015.
To determine the amount of money companies spend lobbying on tax we use the number of issues companies report lobbying as indicated by the reports they file to the US Senate, available on Opensecrets.org. We calculate the percentage of those issues that are related to tax. We apply this percentage to the total lobbying expenditure to create an estimate of the amount of money being spent specifically lobbying on tax. This is a necessarily rough estimate because companies do not disclose their lobbying expenses issue by issue—the actual amount companies spend lobbying on tax may be either higher or lower than our estimate, but without additional reporting we cannot know for certain.
Companies may file multiple reports for each issue they work on, so the total number of issues companies lobby on may seem inflated (ie, companies file several reports naming the same issue). However, this should not influence the percentage attributable to tax or any other issue because all issues will be similarly affected by the frequency of report filings.
The Income Statements is generally referred to as the Consolidated Statements of Earnings, the Consolidated Statements of Income or Consolidated Statements of Operations.
Of the 50 companies in our study, five companies did not disclose the amount of cash they hold offshore. AT&T, Comcast, US Bancorp, and Walgreens all disclose that they own subsidiaries in tax havens but do not disclose the existence of cash held off-shore. CVS does not disclose the existence of cash off-shore but also does not pay any foreign taxes or have any subsidiaries in tax havens.
Robert McIntyre, et al., Offshore Shell Games 2015: The Use of Offshore Tax Havens by Fortune 500 Companies, Citizens for Tax Justice 20 (Oct. 2015). Two of the 50 companies we examined were not included in CTJ’s report: AT&T and CVS. Our researchers looked at Exhibit 21 of their 2014 10-K reports and found that neither disclosed any subsidiaries located in the jurisdictions classified as tax havens by CTJ.
17 CFR § 210.1-02(w).
One example technique is to shift intangible capital to a subsidiary in a low tax jurisdiction and have other subsidiaries or the parent company pay a large fee to that offshore subsidiary to use the intangible capital.