Next US president should curb "tax havens such as Ireland"

Carl Levin, a Democrat, who represented Michigan in the US Senate from 1979 to 2015 today says on tax reform that the next US president "should chart a new course. Curbing tax havens such as Ireland directly serves US interests by helping to limit powerful tax incentives for US corporations to move revenue offshore."

Senator Levin who was chairman of the Senate Permanent Subcommittee on Investigations in 2013 when it published the pivotal report on how Apple used Irish offshore shell companies to avoid most foreign corporate taxes, writes in an op-ed in The Washington Post that US firms already hold an "incredible $2.4trn in profits overseas," mostly in tax havens, dodging an estimated $700bn in US taxes. The former senator who was the main advocate of reform in the Senate says that 65 years ago, $1 out of every $3 collected in federal taxes came from corporations — now it’s $1 in $9.

The former senator slams Jack Lew, US Treasury secretary, for criticising the European Commission for trying to charge taxes that the US should collect but the "irony is that the United States allows US corporations to indefinitely postpone paying US taxes on overseas profits, thanks to a loophole called 'deferral.' If we maintain that other countries can’t tax those profits, and we effectively won’t tax them, then what we’re really saying is that globe-spanning US companies shouldn’t be taxed on those profits at all, even though most US companies can’t avoid taxes that way."

There are already bills before Congress such as the Stop Tax Haven Abuse Act which would authorise the Treasury secretary "to impose restrictions on foreign jurisdictions or financial institutions operating in the United States that are of primary money laundering concern or that significantly impede US tax enforcement."

It is likely that there will be a push for tax reform in 2017 as the Republican Party will not be able to just serve the donor class given the anger that has propelled the candidacy of Donald Trump.

Senator Levin writes:

Use of unjustified tax loopholes by individuals and tax havens by multinational corporations has been tolerated for too long. Trump’s tax-avoidance schemes will remain at least partially hidden as long as he gets away with keeping his tax returns secret. But Apple’s tax gimmicks are well known.

The profits from Apple’s overseas sales of products designed and developed in the United States should be taxed in the United States. But Apple has until now dodged such U.S. taxes by transferring the rights to its intellectual property to itself in Ireland, through shell “subsidiaries” with few employees and little physical presence or tangible economic activity. Apple even had the chutzpah to claim those Irish subsidiaries had no obligation to pay taxes anywhere, other than the token less than 1 percent it paid to Ireland under a special arrangement.