Report Quantifies Cost Of Tax Haven "Abuse"
Massachusetts residents and small businesses lose out when wealthy individuals and corporations escape paying taxes by moving income to offshore tax havens, according to a report released Thursday.
The MassPIRG report said the average Massachusetts taxpayer would have to pay an extra $636 and the average business $3,349 in taxes this year to make up for revenue lost from "abuse" of offshore tax havens.
Corporations and wealthy individuals avoid paying about $100 billion in federal taxes every year by moving income to low- or no-tax havens, such as the Cayman Islands, according to MassPIRG's report.
Deirdre Cummings, MassPIRG's legislative director, said the result is that individuals and small businesses have to make up the difference through higher taxes, spending cuts or more debt.
MassPIRG based its analysis on figures from the U.S. Government Accountability Office.
"Much offshore financial activity by individual U.S. taxpayers is not illegal, but numerous schemes have been devised to hide the true ownership of funds held offshore and income moving between the United States and offshore jurisdictions," the GAO said in 2009.
MassPIRG wants Congress to pass the Stop Tax Haven Abuse Act, a bill pending in the U.S. House and co-sponsored by several Massachusetts congressmen, including James McGovern, Michael Capuano, William Keating, Edward Markey, John Olver and John Tierney. Another bill is pending in the U.S. Senate.
Big corporations often have the means to hire teams of lawyers and accountants that help them find legal ways to avoid tax payments. General Electric, for example, paid no taxes in the United States in 2010, according to a New York Times report. GE told the Times it is committed to paying the taxes it legally owes, but that it has an obligation to shareholders to minimize costs.
"When we pay our taxes, we want to make sure everybody's paying their fair share," Cummings said. "Far too often, the wealthy, or corporations, are not paying their fair share. And Congress has an opportunity to prevent this from happening."
Sara Dustin, owner of Dustin and Moore Antiques shop in Boston, said that when big corporations fail to pay their "fair share" of taxes, government faces a revenue shortfall that affects everyone.
"It squeezes everyone," she said. "We have noticed that business is very tough when government is contracting. People who come to the market have less money to spend."
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