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Sunday, November 27, 2011

Big corporations use loopholes, dodge taxes 2

The Cayman Islands is home to subsidiaries of more than 150 U.S. corporations, including Coca-Cola Co., Intel, HP, Pfizer, Intel, Procter and Gamble and 10 more of the 30 companies in the Dow Jones Industrial Average. Why are they based there?To lower their taxes by clever financial accounting schemes. They employ a variety of strategies like transfer pricing.

This practice called transfer pricing is one of the ways U.S. multinational corporations avoid taxes in the U.S. and other countries. The accounting practice lets companies buy and sell products and services with their own offshore subsidiaries and set prices themselves. Companies abuse transfer pricing by shifting profits overseas to avoid U.S. taxes. They set artificially high prices for imports of products and services provided by their foreign subsidiaries and artificially low prices on exports .

Now these multinationals who have no allegiance to the USA are pushing for a tax break to allow them to bring these profits back to the USA.

These and other forms of financial engineering costs the U.S billions in lost taxes. It is more fully documented in a Bloomberg market report at .


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