A look at the world's new corporate tax havens

 

Our government is in knots over ways to lower the federal budget deficit. Well, what if we told you we found a pot of money - over $60 billion a year - that could be used to help out?

That bundle is tax money not coming in to the IRS from American corporations. One major way they avoid paying the tax man is by parking their profits overseas. They'll tell you they're forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move businesses out of the country.

Tax havens: Do companies pay their fair share?
"60 Minutes" correspondent Lesley Stahl talks tax havens and the new ways American companies are stashing their profits abroad.

Companies searching out tax havens is nothing new. In the 80s and 90s, there was an exodus to Bermuda and the Cayman Islands, where there are no taxes at all.

When President Obama threatened to clamp down on tax dodging, many companies decided to leave the Caribbean, but as we first told you in March, instead of coming back home, they went to safer havens like Switzerland.

Several of these companies came to a small, quaint medieval town in Switzerland called Zug.

Hans Marti, who heads Zug's economic development office, showed off the nearby snow-covered mountains. But Zug's main selling point isn't a view of the Alps: he told Lesley Stahl the taxes are somewhere between 15 and 16 percent.

"And in the United States it's 35 percent," Stahl pointed out.

"I know. It's half price," Marti said.

Marti told Stahl that Zug most probably has the lowest tax rates in Switzerland.

"So you're kind of a tax haven within a tax haven?" she remarked.

"Maybe, yes," he acknowledged.

The population of the town of Zug is 26,000; the number of companies in the area is 30,000 and growing at an average rate of 800 a year. But many are no more than mailboxes.

Texas Democratic Congressman Lloyd Doggett questions whether the recent moves of several companies are legit. "A good example is one of my Texas companies that's been in the news lately, Transocean," Rep. Doggett told Stahl.

Transocean owned the drilling rig involved in the giant BP oil spill. They moved to Zug two years ago.

Extra: Benefits of bringing back cash
Extra: How to shift profits

"I'm not sure they even moved that much. They have about 1,300 employees still in the Houston area. They have 12 or 13 in Switzerland," Doggett told Stahl.

"And yet they claim that they're headquartered over there," Stahl remarked.

"They claim they're Swiss. And they claim they're Swiss for tax purposes. And by doing that, by renouncing their American citizenship, they've saved about $2 billion in taxes," Doggett explained.

Stahl and "60 Minutes" decided to visit their operations in Zug.

A woman at the door told Stahl, "At the moment my boss is not here."

She said her boss wasn't there and we should call someone halfway around the world, in Houston.

"But this is the headquarters," Stahl remarked.

"I know," the woman said.

When asked if the CEO was there or is normally at the Zug office, the woman said "No."

Produced by Shachar Bar-On

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[burchteach]

Ms Stahl pointed out the great benefits of businesses moving to Ireland; however, she didn't point out the detriment to Ireland. They can't pay their bills because they don't have enough revenue - you think?

[gauth725]

I agree with rgraham. I wise man once told me, "Corporations don't pay taxes. People pay taxes." US Corporations are trying to survive in a global economy competing with Non US multinationationals that are subject to significantly less tax. It's simple math. The more money US corps pay in taxes, the less money they have to hire and pay employees, invest in innovation, pay dividends to shareholders, pass on savings to consumers, etc. The American public should ask itself, "Do I want US corporate profits paid to the government and spent on who knows what, or paid to me in wages as an employee, purchases as a small businessman, dividends as a shareholder, savings as a consumer?" Which do you think is the better stimulus to the economy. Our country needs a more rational corporate tax policy. Think before you vote!
M. Gauthier

[Head_Geek]

I was not surprised that CBS never asked the question, what is the unemployment rate in Zug, Switzerland?


Of course, finding out that the unemployment rate is only 2.7 percent might have made this story not so juicy.

[ThereIsABetterWay]

Everyone who is concerned by this should really research the FairTax. Please realize that we, as consumers, are the only "entities" that pay taxes. Corporations simply adjust their prices so that they make a profit AFTER they pay taxes (whatever little bit that might be). We are paying their taxes as part of the price of the goods/services that they sell us. But can you tell me how much of that $1 candybar was covering thier corporate income tax? Or their payroll tax? Nope, becuase it is inherently hidden. Let's find a way to make it simple to pay taxes AND simple to know exactly how much in taxes we are paying. Broaden the base and lower the rate for everyone. We need a more simple tax system. A tax system that taxes illegal activities (or the profits thereof) and illegal aliens. A tax system that taxes imports and puts American corporations on equal footing. A tax system that completely untaxes the very poor but effectively and efficiently taxes the wealth of the rich. Go research it for yourself.

[zuludogm]

Guess which country is the largest and least transparent tax haven? It's the United States. The Obama administration wants to get tough on tax havens so as to reduce the competition.

60 Minutes goes to Zug to find all of these corporate head offices (mailboxes). It would have been a lot shorter trip to go to:

1209 North Orange Street
Wilmington DE

While Zug has one corporation for every 4 employees, this single building in the US has... 217,000 corporations based in it.

Congress wants to stop tax haven abuse, but won't touch it's own tax havens - which are the most powerful and influential havens in the world.

60 Minutes "investigation" is a joke.

[jenga2121]

If America can't compete why don't they take their products off the market and sell them in the country they pay taxes?Their fat wallets prove they get a great return on their investment in this country.There is only one word that describes what they are doing "Stealing"

[rgraham934]

I cannot believe that Ms. Stahl is so locked into her ideaology that she cannot understand that by reducing the US Corporate Tax rate you should be able to have these corporations keep more of their earnings in this country, and therefore we would actually be able to get more tax revenue. This would be because you would be getting tax revenue on earnings that you are not getting now. In addition, we also could increase jobs in this country in the long run.

You see as politicians get stupider and try to force corporations to have to manuever harder to get a lower tax rate, they do everything in their power to lower that rate.

Also in the segment the discussion about all the funds being kept overseas centered around the fact that once they are brought back they would be taxed at the full rate, and that when the country gave a one time lower rate for bringing these funds back to the country the treaury got a windfall. With our concern about defecits isn't that the point. It would be nice to see more jobs in this country and if that helps on the margins it's not a bad thing.

I just do not see the downside of not lowering the corporate tax rate and I believe once again that Ms. Stahl is too much of an idaloge to understand that this would be a net plus for the country.

Richard J. Graham

[SGTMom911]

I was thinking pretty much the same thing: give the corporations a tax break to come back to America, LOWER the tax rate to stay competitive with other developed countries, and in return, the US/IRS gets revenue. 12.5% is better than NOTHING - which is what they're getting now. Add to that all the jobs that would come back to America: more jobs for people; people spending their income here and paying taxes here.

Seems simple enough to me, but it's probably not that easy.

Andrea Toombs

[smartin1971]

You Paid Federal Income Taxes. Why Didn't Verizon?
Verizon U.S. Tax Return
INCOME: $24,200,000,000
TAXES PAID: $0
REFUND: $1,300,000,000

Sources:


Institute for Policy Studies, 3/23/2011;
Washington Times, 4/10/2011
Verizon reported $24.2 Billion in pre-tax income for 2009 and 2010, yet paid $0 in federal income tax.
In addition, Verizon actually claimed a refund of $1.3 Billion, earning it a place on what the Washington Times calls the "Tax Evaders' Wall of Shame."
What's really incredible is that Verizon's actions are perfectly legal. The economy is exploiting tax loopholes to get the maximum reward.
Verizon Should Invest in Jobs and Communities
Despite huge profits and a free ride on taxes, Verizon has slashed good jobs our communities need more than ever. It's pulled back on building out high-speed broadband to connect some rural and inner city areas to the future. And it's neglected the copper telephone lines that millions rely on.
Verizon should pay its fair share of the taxes that fund schools, roads, public safety, job training, and so much more. And it should invest in good jobs, quality service, and broadband buildout.
Verizon's five top executives were paid $258 million over the last 4 years. That is over a quarter Billion dollars!
If middle class working families continue to decline, we will never get out of this recession.
Tell Congress that Verizon and all corporations need to pay their fair share!
Call your Senators and Representatives at 202-224-3121
45,000 members of the Communication Workers of America and International Brotherhood of Electrical Workers are on STRIKE against Verizon.

Verizon made 11.6 BILLION dollars in profit in 2009*
Verizon made 10.2 BILLION dollars in profit in 2010*
Verizon's Wireless Service is only wireless from your cell phone to the cell tower. The service is connected to Verizon's wireline network at the cell tower. There is only ONE network.

Here is why we are on STRIKE:

Verizon has demanded 1 Billion Dollars in Concessions. Almost $23,000 dollars per employee per year.
They have demanded this not because they are a company in financial distress but because they want more. Verizon's revenue in 2010 was 106.6 BILLION dollars*
The contracts that expired on August 6th had strong restrictions on moving work. Not just out of state but also out of the country. If an American worker loses their job because the job is sent overseas, who picks up the slack to cover their federal, state and local taxes? YOU DO!
We are in the worst economy in 75 years and verizon wants its employees to contribute over $10,000 a year to its medical plan before any benefits are paid out. This isn't just about its union members having to pay more, but having to pay more for less
Verizon's demands also want to eliminate things like:
differential for late tours
holidays
freezing pensions
cut disability benefits in half
These union workers are not asking for anything other than to not go backward. Let us keep what we fought for over dacades of bargaining.
Verizon's Chairman Ivan Seidenberg is paid 300 times what an average worker earns, and was the 13th highest paid CEO in America in 2010. He is also ranked 10th in executive pay for 2011 according to Forbes Magazine as he is set to receive $36.75 million dollars this year in total compensation that doesn't include the rise in his stock, which has an estimated value of $76.5 million. Everyday Mr. Seidenberg rolls out of bed in 2011, he will make more than $100,000, while he continues to do everything he can to strip the hard-working union members of their health care, pension, and sick days, etc.+

The Unions just want Verizon to bargain fairly and to negotiate to a fair agreement.
WE ARE READY AND WILLING TO RETURN TO WORK WHEN VERIZON IS WILLING TO NEGOTIATE IN GOOD FAITH

* Los Angeles Times article dated 1/25/2011
+ Examiner.com dated 8/8/2011

[dkelley3117]

I can't understand why a country like Ireland (with a 14% unemployment rate and the possibility of a pending bankruptcy)would allow US companies to come to Ireland without contributing something positive to the country's overall economic condition. What's wrong with this picture?

[diogenes2]

We cannot look at the Corporate Tax Rate in isolation. Swiss companies pay Value Added Tax. This is levied at each point in the production process where ownership changes hands. The standard rate in Switzerland is 8%. So Swiss manufacturers and middle men pay that tax regardless of profit. In addition they pay coporate tax and citizens pay a wealth tax in addition to income tax.

But since these US companies do not manufacture in Switzerland they do not incur significant VAT from the manufacturing process. Further since the total Swiss population is less than the City of New York VAT incurred from sales operations in that country is probably insignificant.

So the only way to tax these Corporations is by applying a new VAT tax to any corporation that avoids US tax liability by the kind of tax manoeuvres described in this program.