A leading U.S. newspaper says U.S. companies are making record profits, but the money is remaining offshore in various other countries where it is lightly taxed.
The Wall Street Journal compiled an analysis of 60 U.S. companies. The report says altogether the companies deposited $166 billion offshore last year, shielding more than 40 percent of their annual profits from U.S. taxes.
The practice is legal according to U.S. rules, which allow for no taxes on overseas profits if the money is not brought back to the U.S..
The newspaper said if just 19 of the 60 companies returned their offshore profits to the U.S., their federal tax hit could reach $98 billion. That is more than the $85 billion in automatic government spending cuts that went into effect last month when the White House and Congress could not agree on alternative plans to reduce the budget deficit.
The Wall Street Journal report said 10 of the companies had more money in offshore accounts last year than they generated for their bottom lines. According to the newspaper, Abbot Laboratories untaxed overseas earnings rose by $8.1 billion to $40 billion – the increase exceeding its net income of $6 billion. The newspaper says the company reported a pretax loss on its U.S. operations.
The Wall Street Journal said the 60 companies in its analysis were chosen because each had at least $5 billion offshore in 2011.
Business groups point out that tax rates are higher in the U.S. than in many other countries, putting American companies at a disadvantage.