Report: Walmart has $76 billion in offshore tax havens

Walmart (WMT) has tucked away $76 billion in assets through a network of undisclosed subsidiaries in 15 tax havens, although that would be a surprise to anyone who reads its regulatory filings.

According to a report from Americans for Tax Fairness, the largest American private-sector employer has never openly reported its complicated system of tax-haven subsidiaries in its U.S. Securities and Exchange Commission regulatory filings. The group said it required hundreds of hours of research to compile the data on Walmart's offshore holdings, searching for information as far afield as Luxembourg and South Africa.

The issue of offshore taxes has increasingly become a political sticking point, with large American companies stockpiling $2.1 trillion in untaxed profits in tax havens outside U.S. borders. In the last 10 years, those offshore profits have jumped more than five-fold as U.S. corporations have tapped strategies to reduce their U.S. tax bill. In the case of Walmart, Luxembourg appears to be the center of its tax-haven strategy, with $64.2 billion in assets parked there, even though it doesn't have a single store in the European country, the report noted.

"Companies use tax havens to dodge taxes. It appears that's the secret game Walmart is playing," Frank Clemente, executive director of Americans for Tax Fairness, said in a statement. "Average Americans and small businesses have to make up the difference when Walmart doesn't pay its fair share of taxes."

Walmart spokesman Randy Hargrove said the report "includes incomplete, erroneous information designed to mislead readers."

In a statement, the company added, "When calculating total assets, this calculation incorrectly includes intercompany assets, primarily investment in our wholly-owned subsidiaries and intercompany loans which both eliminate on consolidation. The methodology is flawed and based upon statutory reports prior to intercompany eliminations which occur during consolidation."

Walmart also noted that it paid $6.2 billion in U.S. federal corporate income tax last year, or about 2 percent of all corporate income tax collected by the U.S. Treasury.

"Walmart has processes in place to comply with applicable SEC and IRS rules, as well as the tax laws of each country where we operate and we maintain transparency with the IRS via real-time disclosure of our business transactions and corporate structure," the company said.

The report, which was researched by the United Food & Commercial Workers International Union and published by the Americans for Tax Fairness, noted that the use of tax havens has typically been common with high-tech firms, pharmaceutical companies and Wall Street banks. Walmart's use of the strategy "suggests that a range of exotic international tax avoidance strategies are being adapted in new sectors of the economy," the report said.

In an interview, Clemente noted that the fact Walmart is using tax strategies is "unique," given that most retailers don't have large international footprints.

Companies are legally required to list subsidiaries that account for more than 10 percent of assets or income, which the report said Walmart may be skirting. Walmart does disclose some foreign subsidiaries, it added, which are located in six countries where it also has retail operations.

One of those isn't Luxembourg, where Walmart hasn't a single store, yet has 22 shell companies, the report found. Twenty of those have been created since 2009, with five established this year. More than $45 billion in assets have been transferred to its Luxembourg subsidiaries since 2011, the report noted.

Walmart does have an office in Luxembourg, where employees help manage its international operations, Hargrove said.

So why use these strategies? According to Americans for Tax Fairness, the tax-haven subsidiaries allow for a few benefits, such as providing low-interest, short-term loans from the subsidiaries. That provides "Walmart affiliates in the United States access to foreign earnings without paying U.S. tax, which may transgress the intent of U.S. law," the report noted.

It also allows Walmart to avoid U.S. tax on those foreign earnings, as well as to generate tax deductions in Luxembourg, it added.

Walmart said it keeps a "large portion of foreign earnings" in international markets, where it can reinvest those funds. "Regardless of where the foreign earnings are held, under the current law, they are not subject to U.S. tax until they are repatriated. Even so, and even with non-U.S. operations comprising nearly 30 percent of Walmart's revenue, Walmart had an effective tax rate of approximately 32 percent over the past three years," it said in the statement.