Dozens of major U.S. corporations are preparing to jump ship in a mass wave of tax-dodging corporate expatriation, the Washington Post reported Wednesday.
According to Sen. Charles E. Schumer (D-N.Y.) a "huge number" of companies are currently shifting their headquarters offshore or are contemplating deals to do so thanks to a tax loophole called "corporate inversion."
"They are taking advantage of all the good things that our government helps provide," and then running out on the bill," said Sen. Elizabeth Warren during a speech before the U.S. Senate last week.
Warren was one of three lawmakers who on Tuesday submitted a letter to President Obama urging him to take executive action against these corporate "freeloaders." The group, which also included Sens. Dick Durbin (D-Ill.) and Jack Reed (D-R.I.), warned that the U.S. could lose billions of dollars in tax revenue if the U.S. government does not take action soon. An estimate by the congressional joint Committee of Taxation found that the nation could lose nearly $20 billion over the next decade.
In the past ten years, 47 major corporations have shifted their base abroad—at least on paper—and another dozen have their move in the works. Schumer estimates that there are many more with some "big announcements" expected in August. On Wednesday, Walgreens announced that they were forsaking their plans—which drew huge national condemnation—to relocate to Switzerland.
Whereas the Cayman Islands was once the top destination for expatriation, more recently U.S. companies have been "planting their flags" in Europe, namely Ireland, where the corporate tax rate is roughly 12.5 percent.
As the Post explains, when a U.S. firm moves its tax home to a nation with lower rates, often by merging with or purchasing a foreign company, the company's international earnings are no longer subject to the 35 percent U.S. corporate tax rate; they are taxed at the lower foreign rate.
The Treasury Department is reportedly exploring possible “administrative actions” that could block inversions or “meaningfully reduce” the associated tax benefits. And congressional Democrats are preparing to advance legislation in September that will outlaw the loophole or hinder its profitability.
Meanwhile, Republicans have grabbed on the issue as an opportunity to argue for a lower corporate tax rate.
"For a person who doesn't want to pay a fair share, our message is clear: you can renounce your citizenship, but don't come back and expect the rest of us to pick up your tab," Warren's speech continued. "Corporations can renounce their American citizenship - and make absolutely clear in legal documents that they're doing so to avoid their US tax obligations - and not suffer any consequences."
"In this corner of the tax code, we've gone way past treating corporations like people," she added. "In this corner of the tax code, we treat corporations better than people."