Hiding from the Taxman?
Revenues for the state’s general fund are up nearly ten percent from last year, according to the governor’s office. Terry McAuliffe cites an improving economy, but critics say Virginia would be doing far better if corporations paid their fair share of taxes.
A progressive interest group called Virginia Organizing claims seven Fortune 500 companies based in this state have $9 billion dollars in untaxed profits, sitting in bank accounts in foreign countries. At the Institute on Taxation and Economic Policy, Director Matthew Gardner did some of the research. He says corporate profits are parked in one of about 50 countries with no income tax and no transparency.
“In 2010, American multi-nationals reported earning $51 billion in the Cayman Islands alone," he explains. " What American companies are reporting in profits in the Cayman Islands is16 times bigger than the entire Cayman Islands’ economy.”
The Virginia companies accused are in Richmond, Roanoke and Northern Virginia – among them, Computer Sciences Corporation, Owens and Minor and Capital One Financial. We contacted them by e-mail and phone, but received no response. Two other firms, Westrock and General Dynamics said they had no comment, but Advance Auto Parts and Genworth Financial said their offshore accounts were in Canada where they had paid taxes. Genworth added that it had paid U.S. tax on profits from three insurance subsidiaries in Bermuda.
Gardner admits it’s hard to tell if any laws have been broken.
“If you go visit the Cayman Islands or Bermuda, you’ll see a bunch of post office boxes, not actual industrial activity," he says. "We have no idea how much of their income these Virginia corporations are shifting out of Virginia, out of the United States. It looks suspicious, but we can’t prove anything.”
And, he says, the Internal Revenue Service lacks the resources to properly investigate.
“There’s been this gradual erosion of financial support for the internal Revenue Service over the last half decade . There’s very little support for giving them the resources they need to adequately enforce the tax laws.”
In 2010, a state legislative committee found 44% of companies active in Virginia pay no income tax, and whatever the reason, The Institute for Taxation and Economic Policy claims that forces small business and individuals to pay more or suffer cuts in services.