Offshore tax report has flaws: conservative group

A free market tax group is questioning a recent liberal report that asserted that U.S. corporations were using accounting gimmicks to claim profits in tax havens.

The Tax Foundation, the free market group, said in a blog post Wednesday that the liberal group, Citizens for Tax Justice, used data so flawed that the report’s findings were “virtually meaningless.”

The problem, the Tax Foundation said, was that Citizens for Tax Justice used data that double-counted some offshore income when it concluded that corporations only paid a 7 percent effective tax rate in a dozen countries in 2010.

“There’s no doubt that U.S. corporations use a variety of legal methods to reduce their corporate tax bill on their overseas operations. It also may be the case that corporations use low-tax countries as a means to do so,” wrote Kyle Pomerleau of the Tax Foundation.

“But measuring the extent to which this happens is not an easy task. All data sources have their flaws and it is best to be open about the limitations when doing these types of analyses.”

Steve Wamhoff of Citizens for Tax Justice responded that the Tax Foundation post did not take on the main thrust of the original report – “that the amount of profits that American corporations claim to have in these countries that are well-known tax havens is so impossibly high that no one can doubt tax avoidance is happening.”