A study conducted by two left-leaning non-profit groups has revealed that nearly 500 largest American companies including software firm Microsoft are operating in tax haven countries like Bermuda, Ireland, Luxembourg, and the Netherlands.
According to the study, Microsoft is holding $108.3 billion in five subsidiaries to avoid US taxes, while a total more than $2.1 Trillion accumulated profits is held offshore by nearly three-quarters of the firms on the Fortune 500 list of biggest American companies by gross revenue.
If these funds are repatriated, these companies will collectively owe an estimated amount of $620 billion to the U.S. government.
One of the strategies used by Microsoft and other big corporations is the Double Irish arrangement, a strategy which uses payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country.
Along with Microsoft, tech-giant Apple is holding $181.1 billion is tax haven countries, and will owe an estimated $59.2 billion in U.S. taxes if these funds are brought back to the United States from off-shore subsidiaries.
Added to this, conglomerate General Electric is holding $119 billion in 18 tax haven subsidiaries, while drug company Pfizer is holding $74 billion in 151 off-shore subsidiaries.
The study revealed, “At least 358 companies, nearly 72 percent of the Fortune 500, operate subsidiaries in tax haven jurisdictions as of the end of 2014. All told these 358 companies maintain at least 7,622 tax haven subsidiaries.”
Further it was added that out of $2.1 trillion of off-shore accumulated profits held by 500 companies, just 30 of those firms account for $1.4 trillion of that amount, which is nearly 65%. Fifty-seven of the companies disclosed that they would pay a combined amount of $184.4 billion in additional U.S. taxes if their profits were not held in off-shore subsidiaries. Their tax filings indicated that they were paying only 6% in overseas taxes, instead of 35% in the U.S.