U.S. Companies Dodge Paying Billions In Taxes—And You’re Paying For It

Between 2008 and 2014, the 50 largest U.S. corporations received 27 times more in federal loans, loan guarantees, and bailouts than they paid in federal taxes.

U.S. Companies Dodge Paying Billions In Taxes—And You’re Paying For It
Photo: Maskot/Getty Images

Tax dodging by multinational companies is estimated to cost the U.S. government up to $111 billion a year. At the same time, companies avoid paying $100 billion in taxes to developing countries, UN figures show. Tax “leakage” (the polite term if you don’t want to ascribe any agency to the companies that are very intentionally doing this) has reached epidemic dimensions, and we really ought to care more than we do. This loss of income jeopardizes public programs and ups the amount other taxpayers have to pay.

Gabriel Zucman

A new report from Oxfam America sheds light on this dark area of corporate activity. The international charity analyzed publicly available information for the 50 largest U.S. companies, looking at how they stash profits overseas (to avoid taxes at home) and how they take advantage of various tax breaks and loopholes. The numbers are jaw-dropping. Between 2008 and 2014, the corporations received 27 times more in federal loans, loan guarantees, and bailouts than they paid in federal taxes. They kept $1.4 trillion in profits offshore (just four financial institutions had 10,688 offshore subsidiaries in 2014). And they paid an effective tax rate of 26.5%–well below the statutory rate of 35%. (Oxfam’s estimate is likely conservative; others have put the effective rate at nearer 20%.)

Take a look at the interactive table here. It shows what the 50 companies received in loans, guarantees, and bailouts; what they paid in taxes; what they held offshore; and how much they spent in tax-related lobbying. Heavy machinery group Caterpillar is a good example. Between 2008 and 2014, Oxfam says it received $5.5 billion in federal support, had $3.7 billion in profits, paid $837 million in all local and federal taxes, got tax breaks worth $459 million, and held $2 billion offshore in 72 subsidiaries. At the same time, it spent $26 million in tax-related lobbying, and had an effective rate of 22.6%.

Pew Resarch

Usefully, the Oxfam report explains how corporations avoid taxes. First, they claim profits are “permanently reinvested” in places like Bermuda. (In 2008, the Government Accountability Office found 18,857 subsidiaries registered at a single office in the Cayman Islands.) But this money isn’t useless. They can still use it as collateral against domestic borrowing, in effect repatriating it in another form.

Second, companies can shift assets such as intellectual property to offshore locations, then pay royalties to that location from the U.S. base, thus reducing their taxable profits. Technology companies are particularly adept at this. According to a report in Fortune, Uber has transferred its IP to Bermuda, leaving less than 2% of net revenue taxable in the U.S. Airbnb does something similar.

Third, they do what’s known as “earnings stripping,” where a subsidiary in a high-tax country will borrow money from a low-tax jurisdiction, allowing the parent company to pay interest to itself. The company as a whole doesn’t lose money, but it can show fewer profits in the location where it’s taxed at a higher rate, thus reducing its tax bill.

And, finally, and perhaps most egregiously, companies can carry out an “inversion.” That’s where they buy a foreign competitor for the sole purpose of establishing a tax base in a lower-rate location. That was the maneuver behind drugmaker Pfizer’s proposed (but now rejected) merger with Dublin-based Allergan. (Ireland’s tax laws make it a common location for tax-dodging schemes, which is why many companies inexplicably have a Dublin office.)


Oxfam concedes that its 2008-2014 federal support figures are inflated by the Wall Street bailout and the auto bailout, and that a lot of federal loans are returned with interest. However, it says “the data is useful to observe in aggregate because it puts in stark relief the taxpayer-financed benefits large companies in general enjoy in relation to the taxes they pay.”

Also, it says some of the tax calculations are probably generous to companies, because they’re based on their own disclosures and include “deferred tax liabilities,” which are monies companies owe (and book as taxes) but don’t actually pay.

The report shows corporate tax avoidance running amok, enabled by complicit lawmakers, an extensive offshore industry of lawyers and accountants, and a normalized moral calculus that says dodging taxes is okay because everyone is doing it.

Except everyone isn’t doing it. Companies say they do a lot of good with the money they don’t give to government, including job creation, charitable giving, and producing innovative products. But the question we have to ask is this: How come it’s okay for multinationals to go to extraordinary lengths to avoid taxes, when small businesses and individuals have to pay the full rate? It’s this double standard that needs addressing.

About the author

Ben Schiller is a New York staff writer for Fast Company. Previously, he edited a European management magazine and was a reporter in San Francisco, Prague, and Brussels.