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US companies holding $2.1 trillion offshore profits

Rum Point, Grand Cayman Islands, Caribbean
Jan Greune | LOOK-foto | Getty Images
Rum Point, Grand Cayman Islands, Caribbean

There's enough cash sitting in offshore bank accounts to wipe out the federal deficit — if only it was subject to U.S. taxes.

That's because U.S. companies are saving some $620 billion by parking profits outside the country, according to the latest accounting from Citizens for Tax Justice and U.S. PIRG Education Fund.

At least 358 large U.S. companies collectively maintain 7,622 separate overseas subsidiaries holding $2.1 trillion in profits, the group said in a report Tuesday. (The estimated tax bill comes from corporate regulatory filings.)

Bermuda and the Cayman Islands are the most popular tax haven jurisdictions; about 60 percent of companies with tax subsidiaries have at least one in those two island nations, according to the report. The Netherlands leads the list in terms of the total number of subsidiaries.

Much of the untaxed offshore profit — roughly $1.4 trillion — is held by a relatively few companies; just 30 corporations held two-thirds of the cash logged by the study.

The overall amount of potential tax could be larger. The group said that only 57 companies disclose the amount they would owe if they didn't report profits offshore.

Apple topped the list, with $181 billion in offshore profits, a cash pile that would generate nearly $60 billion for the Treasury if subject to U.S. taxes.

Pfizer, the world's largest drugmaker, operates 151 tax subsidiaries that hold $74 billion in offshore profits, the fourth highest among the Fortune 500, according to the report.

The report follows a series of recommendations by the Organization for Economic Co-operation and Development, a policy group, to overhaul global tax laws and treaties to better capture untaxed corporate profits.

The proposals are aimed at tax strategies that shift money among subsidiaries around the world to avoid paying tax to a company's home country. Those strategies include shifting assets to countries with low tax rates or booking sales in a tax haven that didn't actually happen there.

"All too often, corporations' offshore cash isn't offshore at all — it's right here in the United States," said Robert McIntyre, director of Citizens for Tax Justice.

A Reuters investigation in 2013 found that 74 percent of the 50 biggest U.S. technology groups used such tactics to cut their tax bills.

Despite widespread calls for U.S. tax reform — including a White House proposal this year for a "tax holiday" for companies that bring cash back home — the overhaul remains mired in the complex web of special interests that such an overhaul would require.

A similar effort on a global scale would be even more complex. While some of the OECD's recommendations could be implemented by individual governments with changes to their tax laws, others would require new tax treaties between countries.