The PIRG report stresses that the offshore tax strategies are often perfectly legal, especially when it comes to corporations. Under current law, multinationals owe taxes on profits made anywhere in the world, but don’t have to pay until profits are brought to the U.S. and get credits for taxes paid to foreign governments.
Supporters of that shift note that most industrialized countries have abandoned the worldwide tax system used by the U.S., and say that a territorial system would give multinationals the incentive to bring some of the hundreds of billions of dollars they have in offshore income back home.
But on Thursday’s conference call, Dan Smith of PIRG and Scott Klinger of Business for Shared Prosperity both said that a territorial system would simply give companies more incentive to shift profits offshore. Levin’s report last year, for instance, found that Microsoft transferred intellectual property rights offshore, saving $4.5 billion in the process.
House Ways and Means Chairman Dave Camp (R-Mich.) released a draft proposal that would shift the U.S. to a territorial system in October 2011, a framework that included rules intended to prevent profit shifting that left some industries grumbling.