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The Ridgway Record – The Daily Press, – The Kane Republican, Friday, July 24, 2015 -7B Guest Commentary


Walmart’s Use of Tax Havens Hurts Small Businesses


Recent revelations that


Walmart, the world’s big- gest corporation, is main- taining secret subsidiaries in well-known offshore tax havens are outrageous but far from surprising to small business owners. That’s because we’re used to seeing large corpora- tions abuse the tax system in ways that hurt our busi- nesses, communities and families. Walmart’s hidden web of 78 subsidiaries in 15 tax havens, unveiled in a report by Americans for Tax Fairness (ATF), is just the latest example. Let’s hope it spurs reform. ATF says Walmart may have skirted U.S. securi- ties law by not properly reporting its tax-haven subsidiaries. But even if hiding them runs afoul of the law, using tax havens to avoid U.S. taxes is per- fectly legal. Yet, every time a big corporation uses ac- counting schemes to avoid paying its full measure of taxes—the typical use of tax havens—small busi- nesses and working fami- lies pay the price, either in higher taxes or deteriorat- ing public services. A good example lies, ironically, right next to my local Walmart: a traffic- choked, 90-year-old high- way desperately needing repair. My cabinet-making company recently had to pay $2,300 to install a new suspension system in a de- livery van ravaged by pot- holes. Now there’s talk in Washington of taxing the offshore profits of compa- nies like Walmart to help fix highways. It may be a worthwhile solution —if it isn’t hijacked by those in Congress who want to give corporations even more tax cuts. Walmart is not alone among big, profitable American corporations using well-known tax- avoidance strategies. In one recent five-year period,


famous corporate names like General Electric, Veri- zon, Boeing and PriceLine. com paid zero federal income taxes, according to Citizens for Tax Justice. It’s outrageous that my small business paid more federal income taxes in one year than all of these huge companies combined paid in five years!


Small businesses can’t afford an army of accoun- tants and tax lawyers like Walmart can to create offshore tax-avoidance strategies. None of us have shell corporations in Luxembourg (a country smaller than Rhode Island and with just half the pop- ulation). Walmart has 22 paper subsidiaries there, holding $64 billion in as- sets. And none of us would get away with paying just 1 percent in taxes—but that’s what Walmart paid Luxembourg between 2010 and 2013, on over a billion dollars in profits. Even if we could pull off such financial shenani- gans, I honestly believe most of us wouldn’t want to. We’d rather contribute what we should to the public good and see our communities thrive right alongside our businesses. Meanwhile, corporate tax dodging flourishes. For instance, American corpo- rations owe U.S. tax on all their profits earned over- seas (less any foreign taxes paid). But a loophole called “deferral” lets them delay paying their U.S. bill until the company brings those profits home. That’s why American corporations have $2 trillion in profits stashed offshore. It makes sense that federal officials are looking to that big cash hoard as a source of highway fund- ing: the federal highway trust fund is going broke and Congress refuses to raise the gas tax to replen- ish it. But don’t be fooled


by two similar sounding proposals for tapping that offshore money that are ac- tually very different—and keep in mind a third op- tion that makes the most sense of all.


The worst idea—a


repatriation tax holiday— would let companies vol- untarily bring their profits home at a tax rate of about 6 percent – way below the normal 35 percent corpo- rate rate. A similar holiday was tried in 2004, and all it did was enrich share- holders and executives, creating few if any jobs, according to a Congressio- nal report.


President Obama would require corporations to pay tax on their offshore prof- its whether they brought them home or not. But the proposed rate of 14 percent is so low that ten compa- nies alone would enjoy an $82-billion tax-cut bonanza over the next decade, ac- cording to Citizens for Tax Justice.


The simplest and fairest solution would be to end the deferral loophole and tax corporations at the 35 percent rate on all their income wherever it is earned. This will eliminate corporations’ incentives to hide profits in tax havens and ship jobs offshore. Like a lot of other cor- porations, Walmart is ap- parently banking on some form of tax holiday win- ning out. That’s why it’s shifting more and more of its profits into tax havens. But it’s small businesses that need the holiday: a permanent holiday from big corporations damaging our businesses and com- munities by gaming the tax system.





Kelly Conklin is co- owner of Foley-Waite, LLC, of Kenilworth, N.J., and serves on the executive com- mittee of the Main Street Alliance.


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