Unlike the secrets exposed by the Panama Papers, big U.S. tax dodging is done in full public view

Quartz reports: Unlike in emerging markets and in Europe, the main US tax avoidance problem isn’t about individuals. Data on financial assets such as stocks and bonds, instruments in which affluent people tend to park their wealth, show a relatively small share of US money is kept offshore.

No, in the US, tax avoidance has more to do with corporations. And much of that dodging has increasingly been done in the clear, bright light of public view.

In his terrific recent book on what he calls the “scourge of tax havens,” Gabriel Zucman, an economist at the University of California, Berkeley, estimates that the artificial shifting of profits to low-tax locales such as Ireland, Switzerland, and the Bahamas reduces US corporate tax liabilities by $130 billion per year.

But the US Treasury Department is taking steps to address this. On April 4, it imposed new limits on so-called tax inversions, a type of deal in which a US company merges with a smaller firm in a foreign country where taxes are lower, adopts the foreign address, and takes advantage of the discrepancy in tax rates.

Such deals have been one of the most popular type of M&A transaction in recent years. The $160 billion deal between US drug giant Pfizer and Ireland-based Allergan is perhaps the most eye-popping example of this. [Continue reading…]

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