JP Horist

English 1102
3/3/16
Offshore Banking
Many of the United States largest and most profitable companies use
offshore bank accounts to hold their profits. Companies like Apple, Starbucks,
and Microsoft all utilize the benefits off offshore banking. These benefits are
huge amounts of money saved by avoiding taxation in the US. The United
States has the highest income tax on large corporations in all developed
countries, being 35%. As a result of these high taxes forcing corporations to
bank in other countries, the Untied States in turn has lost a tremendous
amount of money from income tax. An estimated $735 billion is lost due to
the use of offshore accounts.
An offshore account is a bank in a different country that is holding
money for a company in the United States. These companies are saving huge
amounts of money by avoiding the tax on their profits. From a business
standpoint this is a brilliant idea, but from a politically and morally correct
standpoint, some might argue it is not correct. The problem for the everyday
American is that the only way to regain the lost funds is by raising our taxes
or cutting back budgets. This means school budgets might get smaller and
our health care plans might be diminished.
Gabriel Zucman an author for TheObserver.com explained in his article
that, Corporate taxes are one of the main way to tax capital. In Europe and

the United States, about one-third of all capital tax revenue comes from
corporate income tax, the rest comes from property taxes and individual
taxes on dividends, interest, capital gains, estates and inheritances
(Zucman). This means that we are taking a huge loss on one third of our
entire tax capital as a country as a whole. This past year, Apple has an
estimated $180 billion in cash (Shell, USA Today) held in offshore accounts.
That alone could increase budgets and help the United States economy if it
were to be taxed.
One solution to this issue would be to tax profits that are made in what
country the profit was actually made in. For example, if Apple had 15% of its
sales in Canada, that 15%, and only that 15%, could be taxed by Canada. In
other words, this would help retrieve tax money and also prevent
governments from taxing too much. While this would be a good idea and
seemingly fair way to handle the situation, getting companies to give up
some of their zero percent tax accounts for accounts that would tax them,
would be a bit of a challenge; not to mention getting other countries to agree
to this policy.
President Obama had suggested another reform to regain lost taxes.
This reform would include a one-time tax of 14% on all profits held offshore.
Then, he would also implement a new income tax of 19% on all future
earnings perpetually. While adjusting the permanent tax on profits sounds
enticing enough to work, there would still be a 33% tax that year, which at
the end of the day is only a slight adjustment from the original plan.

It all comes down to profitability. To be a successful business you must

be profitable. These companies have proved to the world that they are the
best at being profitable. It would only make sense that the minds behind
these companies want to keep as much of the money that they have worked
so meticulously to obtain. It would be against their rights for the US to
demand them to bank here. Because of that reason, I do not believe there is
a feasible way to return these companies back from there tax free havens.
While retrieving these lost funds would help increase our economy, we
cannot forget about the detrimental affect it would have on the country that
we are taking it back from. That country also has a pivotal position in the
global market and taking away some of their billions of dollars in tax money
would without a doubt affect not only their economy but the rest of the
economies that they did business with.
The United States does need to address this issue and determine a
way to regain the lost tax money. The only way to do it is to offer a similar
tax on their money as the offshore havens but with the added security and
peace of mind that their money is easily accessible and secure. While we
would not be recovering the full estimated amount that we lose each year,
we would be gaining the better chance that that money will be spent in the
country and will in turn produce more opportunities to recover the lost taxes.
It would also gain trust between our large corporations and our government
so that they will feel less threatened and will increase loyalty to the US.

Off shore bank accounts have been used, and will continue to be used,
by large corporations for decades. This will never be completely eradicated
because of the value it has on the global market. There still needs to be a
change so that we can recover our lost tax dollars and invest it into the
betterment of our country. Once an agreement is made, we will see an
increase in our countrys economy and we will be able to put that money to
addressing other issues and programs.

Works Cited
Shell, Adam. "Tax Proposal Could Cost Apple $10B." USA Today Jan.-Feb.
2015: n. pag. EBSCO host.
Web. 9 Mar. 2016. <http://web.a.ebscohost.com/ehost/detail/
detail?sid=df9771bf-f2f4-4d15-a267-04b9a7e1783f
%40sessionmgr4004&vid=0&hid=4214&bdata=JnNpdGU9ZWhvc3Q
tbGl2ZSZzY29wZT1zaXRl#AN=J0E186592748415&db=a9h>.
Zucman, Gabriel "Inequality is the great concern of our age. So why do we
tolerate rapacious, unjust tax havens? Companies that avoid tax are
depriving countries of vast revenues, but there is now a unique opportunity
for reform; Companies that avoid tax are depriving countries of vast
revenues, but there is now a unique opportunity for reform."
theobserver.com 15 Oct. 2015. Academic OneFile. Web. 9 Mar. 2016.