OPINION — As the Utah Legislature prepares to convene for its 2019 General Session next week, a new report finds that multinational corporations doing business in Utah, many in direct competition with Utah-based businesses, are unfairly hiding their profits in offshore tax havens, leaving it to local businesses and residents to pick up the slack – which adds up to $103 million.
The good news is that there is a simple fix that the Utah Legislature can enact during the coming legislative session: Worldwide Combined Reporting.
Like most states, Utah already enforces Domestic Combined Reporting to prevent multistate companies from employing a variety of schemes to artificially shift profits to lower-tax states and avoid paying their fair share of Utah’s corporate income tax, all of which goes to fund Utah’s schools. But many large companies have taken unfair advantage of globalization to artificially shift profits to tax havens abroad like the Cayman Islands, and state tax laws have not kept up.
“The Governor has proposed a package of tax modernization proposals that seek to update our laws to keep up with changes in our economy,” said Patrice Schell, Voices for Utah Children’s State Priorities Partnership fellow. “Worldwide Combined Reporting should be on that list so that local businesses aren’t at an unfair disadvantage trying to compete with global giants who are gaming the system to avoid paying their fair share.”
Matthew Weinstein, State Priorities Partnership director at Voices for Utah Children, said, “Utah has a healthy budget surplus this year, but that usually happens right before the next recession. $103 million of new revenue would go a long way to addressing the current underfunding of Utah’s Pre-K-12 education system, which has some of the worst teacher attrition and overcrowded classrooms in the nation, as well as high school graduation rates that are behind national averages for every racial and ethnic group.”
The new report, titled “A Simple Fix for a $17 Billion Loophole,” was authored by the Institute on Taxation and Economic Policy, based in the District of Columbia, and the U.S. Public Interest Research Group, based in Boston. The 36-page report is available here.
“When multinational businesses dodge billions in taxes, that money doesn’t come out of a hat. It means states have less money for public priorities such as education or it means that other businesses or individuals end up paying more,” said U.S. Public Interest Research Group Education Fund’s Nathan Proctor, one of the report’s authors. “Luckily, states can even the playing field and recover billions of dollars for critical services without raising tax rates.”
Richard Phillips, a report co-author and senior policy analyst with Institute on Taxation and Economic Policy, said, “Congress promised to address offshore tax dodging in the 2017 tax package, but it failed entirely. If states were waiting on Washington to fix these problems before, they can’t now. And our report shows that they don’t have to.”
Bill Parks, founder of Idaho-based SalesFactor.org, said, “Our tax system is unfair and inefficient – and federal reform failed to address those concerns. Worldwide Combined Reporting makes tax return filing easier for small businesses, and ends the grossly unfair advantage larger multinationals currently have on their small business competitors. It should be a no-brainer.”
John O’Neill of the American Sustainable Business Council, which has a member network representing 250,000 businesses, said, “Right now, responsible businesses pay their fair share of taxes, while others are allowed to dodge and avoid their fair share. That hurts everyone. Too many companies have abandoned their moral obligation to pay the full amount they owe for the public services and infrastructure they use in our states. That means other taxpayers, including small businesses, have to pay more.”
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