Most people have already heard of companies like Apple and GM exploiting loopholes to get away with paying virtually no taxes, but there are other methods of tax dodging that are gaining popularity. Worse yet, these new tactics involve outright abandonment of the country — or at least the US economy — while simultaneously reaping the benefits of spend-happy American markets and legislative protection. Fortune has even compiled a list of tax avoiders in an effort to raise awareness about these practices.
One of the ways in which corporations are pocketing money on the taxpayers’ dime is through something called inversion. This is the process by which an American company uproots itself and moves overseas to merge with a rival company. They can then reincorporate in that country with a lower tax rate and pocket huge sums that should contribute to the well-being of their country. Want to know the kicker? Inversion is completely legal.
Perhaps more astonishing is that some companies can attest that they were never US-based to begin with (even though they absolutely were). These corporations began as public, US companies, then went private in buyouts, only to reopen to the public in—you guessed it—another country. Such tax avoiders, according to law, were literally never US companies, and are not seen as tax dodgers.
Of course, we aren’t talking about mom-and-pop shops that are bending the rules to stay afloat either. These are established, multi-million-dollar corporations that have “tax residences” in different countries than their headquarters. Carnival Cruise Lines, for example, is headquartered in Miami and has a tax residence in Panama. Garmin, the GPS giant, has a tax residence in Switzerland while headquartered in Kansas.
The amount that such unbridled avarice has cost our country is already estimated in the billions, and if it continues at such a rate we are looking at roughly $19.5 billion tax dollars missing by 2024. The scary part is that only about 60 businesses have begun to apply such practices, and others are looking to follow. Walgreen’s is currently looking to reincorporate in Switzerland, and the pharmaceutical powerhouse Pfizer tried the same in Britain only to have the deal fall through.
With such lucrative organizations dead set on leaving the country to increase profit margins and stock value, swift action is needed in Congress to tighten such loopholes that are being abused by the wealthiest Americans; in other words, the future looks dim. With every US corporation that strikes a deal overseas and reincorporates itself, huge amounts of money are being taken from all of us. If something doesn’t give, $19.5 billion is just the beginning.