Many of the largest publicly traded corporations in the U.S., including major banks that now receive federal bailout money from the Government, are using subsidiaries in offshore tax havens, which let them avoid paying U.S. taxes. This information can be found in the new report by the Government Accountability Office (GAO) published last week.
GAO searched publicly available data on the companies filed with SEC, and found that 83 of the 100 largest publicly traded corporations and 63 of the 100 largest federal contractors maintain subsidiaries in countries considered to be tax havens. Citigroup has set up 427 tax haven subsidiaries in offshore tax havens including 35 in the British Virgin Islands and 90 in the Cayman Islands. In this list there are also Bank of America which has 115 subsidiaries in offshore countries, Morgan Stanley with 273 subsidiaries, the American International Group, etc. There are other well-known companies in the list including Pepsi, Coca Cola and Ceterpillar. Other offshore tax havens mentioned in the report are Switzerland, Luxembourg, Hong Kong, Panama and Mauritius.
Meanwhile, Citigroup is expected to receive $50 billion from Government. Bank of America has already received additional $20 billion of Government aid, on top of previous $25 billion.
This report was severely criticized by the Treasury Department. In a letter included in the report it was noticed by the deputy assistant secretary for international tax affairs that there was no universal definition for an offshore tax haven. Thus, any list of tax havens may be considered a blacklist and used for applying sanctions or other negative measures that would “inappropriately negatively affect our economic and other relations with listed countries.”
It should be said that GAO auditors did not verify the companies’ transactions in the named offshore jurisdictions including BVI, that the subsidiaries really helped the companies reduce their tax burden. The results of the report were based just on the fact that subsidiaries are located in the jurisdictions considered tax havens, and on the traditional purpose of those subsidiaries to cut tax costs.