The Paradise Papers leak this past Sunday wasn’t shocking.
If anything, the varied revelations about what celebrities and corporations use offshore tax shelters only further justify the general public’s long-standing suspicion that the rich and powerful cheat on their taxes.
It’s also safe to assume that this latest detailed batch of leaks won’t be enough to warrant actual change from the governing powers that be.
What Are the “Paradise Papers”?
The “Paradise Papers” are leaked records taken from Bermuda law firm Appleby, which specializes in hooking up the wealthy with tax shelters. Originally published on Sunday by German newspaper S眉ddeutsche Zeitung, the records revealed a web of investments and schemes that make it easier to hoard cash without paying taxes.
Those implicated include the lead fundraiser for Canadian Prime Minister Justin Trudeau, U.S. Commerce Secretary Wilbur Ross, U.S. Treasury Secretary Stephen Mnuchin, and the Queen of England. The leak also showed how corporations like Apple Inc. (Nasdaq: AAPL) and Nike Inc. (NYSE: NKE) take advantage of offshore tax havens.
In short, nothing will make the 1% or America’s wealthiest institutions pay their fair share.
It’s Not Illegal to Use Tax Havens
In the United States, some citizens and companies use the offshore world for legitimate purposes – such as when companies want to smooth international trade transactions. And being identified as an individual or company holding such offshore accounts is not, in and of itself, an indication of wrongdoing.
Take Apple, for example.
There are a lot of ominous, implicating facts being highlighted in the mainstream media right now about America’s richest tech corporation.
The Paradise Papers revealed that Apple currently holds $236 billion offshore, according to The New York Times on Nov. 5. That sum is just a small portion of the larger foreign profits stash – an estimated $2.6 trillion total – hoarded abroad by U.S. corporations in all.
Apple pays taxes on just a small fraction of that $236 billion sum, according to calculations by NYT. Specifically, the company “reports that nearly 70% of its worldwide profits are earned offshore,” the outlet reported. This means that Apple Inc. only pays U.S. tax rates on 30% of its overall profits.
And it uses creative tax machinations to get this done. In fact, it was Appleby’s job to do all that numbers crunching and money shifting – none of which broke any laws.
Free Book:The secrets in this book helped oneMoney Morningreader make a $185,253 profit in just eight days.Learn how to claim your copy here…
This is because, under the current tax code, foreign profits that aren’t “repatriated” into America can legally avoid taxation this way. That is to say, corporate foreign profits can be stored in offshore accounts indefinitely, without being subject to U.S. corporate tax rates.
And, to an extent, doing so – especially for multibillion-dollar companies like Apple Inc. – makes sense. At 35%, the current U.S. corporate tax rate is the highest in the world. Without the use of a tax haven, Apple would have to pay $1.7 billion in taxes per year.
Not to mention that repatriating its $236 billion in overseas cash holdings would cost Apple $82.6 billion.
That’s… a lot.
We can hope, of course, that the tax plan currently being fought over in Congress will change all that and make offshore accounts less desirable.
But that’s not necessarily true either…
For Some, the New Tax Plan Will Make Tax Havens More Desirable
You see, while the new tax plan does drop the U.S. corporate tax rate from 35% down to 20%, in hopes of enticing big companies to repatriate their foreign profits back onto U.S. soil, it also provides a stipulation that would make it easier for wealthy individuals to use tax havens at the same time.