Tuesday, 14 June 2011 14:17

Letter from Business for Shared Prosperity to Congress on the Abuse of Tax Loopholes and Tax Holidays by Multinational Corporations

June, 2011.

This sign-on letter from Business for Shared Prosperity urges members of Congress to close tax loopholes used by multinational corporations that are transferring U.S. profits, jobs and investments abroad, instead of giving in to pleas and pressure to institute either short or long-term tax holidays on profits held in offshore accounts.


Dear Senators and Representatives,

As business organizations with small business members throughout the United States, we call upon Congress to reject pleas by U.S. multinational corporations for short and long-term tax holidays on profits held offshore, and to instead close the tax loopholes that reward companies for transferring U.S. profits, jobs and investment abroad.

Too many corporations have turned their tax departments into profit centers, using aggressive accounting manipulation to disguise U.S. profits as foreign profits. This is done for the express purpose of avoiding tax payments. Now we find a coalition of corporate tax avoiders demanding a tax holiday in order to bring home the funds they shifted offshore to avoid paying taxes. This proposed “repatriation“ would not be a win for America. It would cost the U.S. Treasury $80 billion according to the Joint Committee on Taxation and increase pressure to cut government spending on services our businesses depend on. We also oppose changing to a territorial tax system, which would accelerate the use of aggressive accounting techniques to shift domestic profits to overseas tax havens, permanently rewarding those who seek to avoid their taxpaying responsibilities.

Bloomberg Business Week recently illustrated examples of this tax avoiding behavior: Forest Laboratories “sells nearly 100 percent of its drugs in the U.S. – and cuts its U.S. taxes dramatically by attributing the bulk of its profits to a law office in Bermuda. … Google reduced its income taxes by $3.1 billion over three years by shifting income to Ireland, then the Netherlands, and ultimately to Bermuda.” We need to stop this irresponsible tax avoidance, which undermines the U.S. economy, and assure that all businesses play by the same tax rules.

There is simply no excuse for repeating a policy that’s a proven failure. In 2004, a corporate “repatriation tax holiday” was passed with the promise of stimulating domestic investment and creating jobs in the United States. Instead, studies showed that the beneficiaries of the tax holiday used their repatriated earnings to give a huge windfall to corporate owners and shareholders – including many CEOs – in the form of stock buybacks and dividends. For example, the National Bureau of Economic Research found that a dollar increase in repatriated earnings “was associated with an increase of almost $1 in payouts to shareholders.” In the wake of the tax holiday, U.S. multinationals eliminated more American jobs and shifted even more income and investment to offshore tax havens.

Corporate taxes, like individual income taxes, support the public services and infrastructure upon which all businesses depend. These include a publicly educated workforce, transportation systems, safe drinking water and sanitation, the judicial system, taxpayer-funded research (which played a crucial role in health advances and the creation of the Internet, for example), federal emergency response and so on. But, the public services and infrastructure underpinning a healthy economy are now being cut dramatically because of inadequate revenues.

When powerful large U.S. corporations avoid their fair share of taxes, they undermine U.S. competitiveness, contribute to the national debt and shift more of the tax burden to domestic businesses, especially small businesses that create most of the new jobs. A transparent corporate tax system that assures all companies – large and small – pay for the services upon which our businesses, our customers, our workforce and our communities depend, would help restore the economic vitality and domestic job creation we all seek.

Sincerely,

Holly Sklar
Executive Director
Business for Shared Prosperity

Frank Knapp, Jr.
President & CEO
The South Carolina Small Business Chamber of Commerce

Sam Blair
National Director
Main Street Alliance

David Levine
Executive Director
American Sustainable Business Council

Wendy Rosen
Founder
American Made Alliance

Alisa Gravitz
Executive Director
Green America

Rudy Arredondo
President
National Latino Farmers & Ranchers Trade Association

Deborah Nelson
Executive Director
Social Venture Network

Mark McLeod
Executive Director
Sustainable Business Alliance

Alison Goldberg
Coordinator
Wealth for Common Good
Nate Libby
Director
Maine Small Business Coalition