News & Politics

Corporate Tax Cheats

Would you pay $720 for a jar of salad dressing? It's from Brazil, but still .... How about buying tweezers from Japan at $4,896 each?
Would you pay $720 for a jar of salad dressing? It's from Brazil, but still .... How about buying tweezers from Japan at $4,896 each?

These are not more of the infamous Pentagon purchases that occasionally make the news, but purchases that U.S.-based corporations routinely make from their own foreign subsidiaries. What we have here is a tax scam. It amounts to a massive money-laundering scheme in which corporations "buy" supplies and services from their overseas selves, grossly inflating the price they pay. These phony purchases move huge sums of corporate profits out of our country into the accounts of their foreign affiliates, thus escaping U.S. taxation on those profits.

Scamming Uncle Sam has become very big business, according to two highly-respected finance professors who've been tracking this annual rip off for a decade. Simon Pak and John Zdanowicz calculate that this "transfer pricing," as they term it, cost our public treasury $53 billion last year alone, and it's on the rise. Wow -- $53 billion would pay for a lot of health care, bridge and road repairs, alternative energy research, and other crying needs that the politicians keep telling us there's no money to finance!

Instead, this $53 billion was pocketed by the tax thieves. The transfers go two ways. In addition to buying from foreign subsidiaries, U.S. corporations also sell products to their overseas affiliates at ridiculously low prices, such as selling missile launchers to an Israeli subsidiary for $52 each.

This corporate fraud is another of the joys of globalization. Multinational firms play these global shell games to rip off We The People -- yet the treasury department doesn't even track their international tax-evading transactions.

Senator Byron Dorgan is on the warpath against these corporate cheats. To back his effort, call 202-224-2551.
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