After dodging US tax laws by stashing cash offshore, corporations have been using accounting tricks to repatriate their "money on the sidelines".
At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.
The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or "repatriated."
...What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers -- including "the Killer B" and "the Deadly D."
In October 2008, the drug company Eli Lilly purchased ImClone Systems with $6.5 billion in cash. Three months later, drug giant Pfizer paid $68 billion to take over Wyeth. In March 2009, the pharmaceutical company Merck put up $41 billion to acquire Schering-Plough. What was not disclosed at the time is that these mergers were all funded using cash repatriated from offshore tax havens.
Merck & Co Inc., the second-largest drugmaker in the U.S., last year brought more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp., securities filings show. Merck is also appealing a federal judge’s 2009 finding that Schering-Plough owed taxes on $690 million it had earlier brought home from overseas tax-free.
The largest drugmaker, Pfizer Inc., imported more than $30 billion from offshore in connection with its acquisition of Wyeth last year, while taking steps to minimize the tax hit on its publicly reported profit.
Disclosures in Switzerland and Delaware by Eli Lilly & Co. show the Indianapolis-based pharmaceutical company carried out many of the steps for a tax-free importation of foreign cash after its roughly $6 billion purchase of ImClone Systems Inc. in 2008.
After the mergers, each company announced massive layoffs. Pfizer cut 19,000 jobs, Merck eliminated 17,500, and Eli Lilly shaved 5,500.
The fallacy of the "low-tax solution" to our unemployment problem is evident in the path that illicit money takes after being laundered out of the United States. Using international tax-dodging schemes, companies such as Microsoft extract cash from the American public and send it offshore.
To further avoid obligations, the money is fed back into the corporate supply chain through third-world sweatshops. Last year, the worforce of the Chinese firm that produces the Microsoft Xbox 360 grew to over 1 million. This is more than the number of jobs that were added in the United States.
So instead of helping to fund our teachers, cops, and firemen, U.S. corporations have been using the taxable portion of their profits to gut the American manufacturing base. Nowhere was this dichotomy more evident than in the fight to obtain health care services for the 9/11 responders.
Fronted by the U.S. Chamber of Commerce, the morally decrepit corporate lobby took an unfathomable position. The same public servicemen who dug through the rubble of the country's financial center should be allowed to die, they argued, so that a foreign tax loophole would remain open. The cowardice of this position is too reprehensible for words...