by Kent Hoover
It’s big business versus small business in a new campaign to end the abuse of offshore tax havens by U.S.-based multinational corporations.
A new coalition, Business and Investors Against Tax Haven Abuse, issued a report today that concluded at least $37 billion a year in additional tax revenue could be collected if Congress cracked down on these tax havens. This money could be used to help small businesses by creating a $30 billion lending fund for community banks, said Senator Carl Levin, Democrat of Michigan. That proposal is now pending in the Senate, where paying for things has become a major stumbling block for new programs.
The coalition calling for an end to these tax havens includes organizations composed of progressive-minded small-business owners: Business for Shared Responsibility, the American Sustainable Business Council, and Wealth for the Common Good, to name three. In all, about 20 business networks representing 50,000 business owners and social enterprises are involved in this campaign, according to Bob Keener, a spokesman for Business for Shared Responsibility.
Those numbers pale compared with the hundreds of thousands of business owners represented by the National Federation of Independent Business and other conservative-leaning business groups in Washington.
But this new coalition has a message that could resonate with small businesses, especially in this post-bailout economy, where large corporations seem to be back on their feet but the little guys and gals are still struggling.
Closing these tax havens is all about creating “a level playing field for businesses,” Keener said.
“I’m proud to be an American and pay taxes,” said Deborah Ruh, CEO and founder of TecAccess in Rockville, Virginia, a 40-employee firm that specializes in making information technology and communications available to the disabled. Ruh said she resents that large businesses aren’t paying their fair share of taxes because of these tax havens.
Levin said his efforts to “close down some of these loopholes” will be helped by the involvement of small businesses in this lobbying campaign.
“Most of our small businesses carry their fair share of the tax burden,” he said. “We’ve got too many corporations who have sheltered themselves from paying their fair share of taxes.”
Representative Lloyd Doggett, Democrat of Texas, offered up a timely villain: Transocean, the owner of the Deepwater Horizon rig whose failure resulted in the massive oil spill in the Gulf of Mexico. It moved its corporate headquarters first to the Cayman Islands and then to Switzerland in order to reduce its U.S. taxes, Doggett said.
“I never viewed Zug as being a petroleum capital,” he said.
Zug is a small town in Switzerland whose low tax rates has made it a popular home for multinational corporations.
Doggett and Levin want to change tax laws to treat companies like Transocean, whose operations remain based in Houston, as a U.S. corporation for tax purposes. Other corporations set up bank accounts in hidden tax havens or send intellectual property offshore to avoid paying U.S. taxes on them, Levin said.
The report makes a big deal about the number of foreign subsidiaries that many large corporations have. Citigroup, for example, had 427 “tax haven” subsidiaries in 2007, the report noted. But wouldn’t you expect a corporation like Citigroup, whose tentacles spread across the globe, to have lots of foreign subsidiaries? Isn’t that how business is done in the global economy?
Sorting out what’s an abusive tax shelter and what’s an appropriate strategy for a multinational corporation is a complicated matter. It should be undertaken as part of an overall reform of our tax system, not as a convenient pay for legislation that could be days away from Senate passage.
Multinational corporations by definition aren’t really U.S. companies—they belong to the world. We should get what’s coming to us, based on their economic activity here, but we shouldn’t make ourselves an unattractive place to do business.
Plus, feeding resentment toward big business could hurt small businesses in the end. We’re all in this together—businesses of all sizes need to be successful in order for our economy to flourish.
Kent Hoover is the Washington bureau chief for bizjournals.
