Think twice about foreign investment

Apple, Dell, Microsoft, Nike. These are all household names in Zimbabwe, but they are also Fortune 500 corporations based in the United States.

Apple has been in the news recently for its strategy of shifting profits to off-shore tax havens. A report by the Citizens for Tax Justice, however, says Apple is not alone. Hundreds of other Fortune 500 companies are also engaging in similar strategies to avoid paying tax in the United States which is 35 percent for corporations.

The Fortune 500 is an annual ranking of the biggest companies in the United States in terms of revenue.

Apple is currently ranked at number 6 with retail giant Wal-Mart Stores, which recently bought Mass Mart which owns retail stores like Makro and Game, at number 1.

The report says at least 18 companies disclosed that they had US$283 billion in cash parked offshore. These companies also disclosed that they would pay a tax rate of 30 percent – “a clear indication that they have paid very little tax on these profits to any government”.

US companies which pay taxes to foreign governments are allowed to deduct the percentage of tax they pay from the US tax rate which is 35 percent

The story gets more interesting. The report says the 18 are not alone in shifting profits, they are alone in disclosing it.

Some 290 other Fortune 500 companies have disclosed in their reports that they are holding their income in “permanently reinvested” foreign profits, but only 55 disclose the tax rate they would pay in the US.

The 235 companies that did not disclose their US tax rate collectively hold almost US$1.3 trillion in unrepatriated offshore profits.

If all 290 companies paid taxes upon repatriation, this would bring a whopping US$491 billion in added corporate tax revenue.

The question is, with increased calls for foreign investment, if these companies can withhold so much tax from the World’s biggest economy, what more from our countries which are not even collecting enough taxes locally and rely on the benevolence of the companies to pay their taxes?

Read the full CTJ report here.

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