A look at the world's new corporate tax havens

Lesley Stahl explains how U.S. corporations are cutting their tax bills by moving business overseas

An increasingly popular way, particularly pharmaceutical and hi-tech companies like Google avoid paying the 35 percent is to shift their patents, computer code, pill formulas, even logos from their U.S. bases to their outposts in low-tax countries.

"A hundred years ago, if a company would want to relocate, you know, you'd have to pick up a factory, machinery and move everything. Today, a company can move predominantly all of its assets just on paper," Swiss tax attorney Thierry Boitelle explained.

"Or Coca-Cola could take the recipe out of the vault, put it in a Swiss vault," he said.

"And then it's Swiss?" Stahl asked.

"Yeah," he replied.

When a formula or a computer code is registered abroad - say in Zug - a U.S. company is allowed to claim a lot of its taxable profits are there, even if most of its sales are in the U.S.

Economist Martin Sullivan told Congress these patent and profit transfers are accounting tricks that have allowed companies to chip away at the 35 percent and save tens of billions of dollars. He says that from 2007 to 2009 these maneuvers helped lower Pfizer's average tax rate to 17 percent; Merck to 12.5 percent, and GE to just 3.6 percent.

"It's really remarkable, as I review the data, is the consistency with which you see this phenomenon. The taxes are going down, the profits are shifting offshore at an accelerated rate over the last few years," Sullivan said.

So now these companies have profits accumulating overseas in places like Zug.

If they bring the money home, it's taxed the full 35 percent. If they leave it overseas, the IRS can't touch it. In other words, the tax law all but forces companies to keep their money out of the country, indefinitely.

"We leave the money over there. I create jobs overseas; I acquire companies overseas; I build plants overseas; and I badly want to bring that money back," John Chambers told Stahl.

Chambers told Stahl Cisco has almost $40 billion overseas that could be brought back to the U.S.

The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.

"What is your downside for money that isn't going to come back anyhow? I'd say your downside is zero," he told Stahl.

But the Obama administration opposed this idea. When it was tried in 2005, the Treasury did rake in billions of dollars, though very few jobs were created.

"What if tomorrow Congress passed a quickie law and the tax rate was 20 percent? Would that solve everything?" Stahl asked.

"I think it is the most important ingredient that we have to think about being competitive," Chambers replied.

"You lower the rate from 35 percent to 20 percent. You lose something like $2 trillion in taxes. We have a horrible deficit crisis, debt crisis. That's almost too much money to lose. What's your answer to that?" Stahl asked.

"My answer's very simple: every other developed country in the world has already done this. I'm not asking to give me a favor, or a hand out," Chambers replied.

"You know what: it sounds it," Stahl remarked.

Chambers replied, "All we're asking is: Give us a level playing field. Get us close."

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