U.S. companies stashed another $200 billion in profits overseas last year, escaping billions in taxes, and escalating a battle with Congress over the country’s complex tax code.
The amount of unrepatriated foreign profits reached $2.4 trillion, according to Citizens for Tax Justice, allowing companies to avoid up to $695 billion in taxes. The total for foreign profits is up from $2.2 trillion the previous year, according to the advocacy group which reviewed the Securities and Exchange Commission filings of Fortune 500 companies. Apple, Microsoft and Pfizer increased their stockpile of overseas profits the most.
The report highlights what has become a growing frustration for Congress: U.S. companies have refused to bring the profits they earn overseas back home where they face the highest tax rate in the developed world, 35 percent. Instead, hundreds of companies simply leave the funds overseas. Some are waiting for Congress to lower the rate, or hoping for a window of amnesty. But others are pursuing “inversions” in which they buy or merge with a smaller foreign company and move their headquarters overseas where they will be taxed less and can gain access to their unrepatriated foreign profits.
Lawmakers and the Obama administration have struggled to come up with a solution. In his latest budget proposal, President Obama calls for imposing an19 percent tax on foreign profits — significantly lower than the current rate. But there is little political momentum to address the issue during the 2016 presidential election cycle and Republicans and Democrats remain split on an approach.