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Corporate Tax Avoidance - 10/16/14

Some recent statistics emerging from the President’s Council of Economic Advisers indicate just how serious the issue of corporate tax avoidance has become.  According to statistics quoted in the New York Times and elsewhere, American-controlled corporate profits in the British Virgin Islands equal 1009 percent of the islands’ gross domestic product, while in the Cayman Islands, they exceed 1400 percent.  The chances that U.S. corporations are generating that level of profitability from these locations is approximately zero, and yet the tax impacts are significant. 

Many analysts have indicated that several corporations with overseas headquarters are engaging in creative accounting to shift profits from where they are actually earned – the United States of America.  By claiming to generate the bulk of their profitability abroad, many companies are able to defer taxes on profits.  This means that businesses operating in the U.S. that can’t or won’t move their profits overseas end up shouldering a disproportionate share of the tax burden.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.