The Cost Of Corporate Tax Avoidance In US

This article (via Manan Shukla) provides some details on the extent to which US multinational corporations avoid taxes by funneling their profits through a small number of low tax nations.  In 2008, which is last date for which information is available, total pre-tax corporate profits were $1.36 trillion.  $938 billion, or 69% of pre-tax profits, came from abroad.  Four low tax nations accounted for 43% of overseas profits.  Those states accounted for only 7% of total investment and only 4% of total employment.  It is pretty clear that they are the result of financial engineering.  Bermuda, Ireland, the Netherlands and Switzerland account for profits that are well beyond the level of business activity in those countries by US corporations.

The total loss of tax revenue to the US from financial engineering is estimated to be between $57 and $90 billion.  To put this in perspective, the budget cuts contained in the sequester, which are intended to reduce the US budget deficit, amount to $110 billion. They wouldn't be needed if we, and other higher tax states, did not permit it to happen.  Moreover,  we should understand that the tax revenues lost by financial engineering shift the tax burden to others.  The exorbitant privilege that we, and others extend to multinational corporations, enrich corporate executives and their shareholders at the expense of the general community.  This raises serious questions about the fairness of the tax system, and the extent to which multinational corporations influence tax policy and tax enforcement.