Earlier this year, the United States Congress debated creating a "repatriation tax holiday" - an amnesty for offshore corporate profits - that would have provided a special lower corporate tax rate for multinational companies that bring overseas profits back to the United States. Some observers have argued that many multinationals have been sheltering their profits in overseas tax havens, based on the hope that Congress will repeat the same "tax holiday" experiment it previously undertook in 2004. A new CTJ analysis of the financial reports of the Fortune 500 companies shows that 285 of these corporations had accumulated more than $1.5 trillion in overseas profits by the end of 2011, and there is evidence that a significant portion of these profits are located in tax havens.
In particular, our analysis shows that ten corporations, representing over a sixth of the $1.5 trillion in unrepatriated profits, reveal sufficient information to show that they have paid little or no tax on their offshore profit hoards to any government. That implies that these profits have been artificially shifted out of the United States and other countries where the companies actually do business, and into foreign tax havens.
For hundreds of other companies with overseas cash holdings, Congress currently has little information at its disposal that could tell policymakers how much of these companies' unrepatriated profits are, in fact, anything more than earnings artificially shifted into tax havens. Before taking any action to deal with these unrepatriated profits, policymakers should demand full disclosure about the taxes that have been paid, or not paid, on these offshore profit hoards.