What’s your next vacation location: the Caribbean Tahiti, Bermuda, Belize, the Virgin Islands, or perhaps the Cayman Islands? These are all great choices and many of the world’s wealthiest individuals not only get to travel to these exotic locations on a regular basis, but many of them even own homes or other properties there. Individuals are not the only ones that enjoy getting away to these kinds of dream vacation locations. Many of the world’s largest companies, including several from the United States, also enjoy the sunny shores and beaches of these vacation havens.
Sunny and Warm and Big Tax Savings
However, when it comes to corporations they aren’t really looking for the next great vacation spot, but rather the next great tax haven. U.S. companies use several foreign countries to help filter their profits through their subsidiaries or business units in these offshore locations, and thus avoid higher taxes in America. There are several locations around the world that have a reputation for being very tax-friendly when it comes to corporate taxes. The list goes on and on, but which locations are best of the best? Which vacation getaways also offer the best corporate tax getaways? The exact list of winners isn’t totally clear, but three of the best places for companies to go to escape the high corporate taxes in the U.S. include the British Virgin Islands, the Cayman Islands and Bermuda.
Bermuda Brings In Big Bucks
So just how big were the numbers in these three locations? According to a report from the Citizens for Tax Justice, together with the U.S. Public Interest Research Group, companies controlled in the U.S. reported $155 billion in profits in 2010 in these three countries, which is the most recent data available. Meantime, those three countries combined for a total of $10 billion in gross domestic product by comparison. Of the three countries, Bermuda was the biggest winner after it booked profits of around $94 billion in 2010 compared to its gross domestic product of only $6 billion. The numbers don’t lie. It’s clear that companies can, and do, save a lot of money by shifting their profits through overseas business units. However, there are many entities that want this practice to stop.
Trying to Close the Loopholes
In fact, the report from Citizens for Tax Justice was released about the same time as the G20 finance ministers were meeting to put a cap on several new international tax rules that are aimed at shutting the corporate tax loopholes that these companies use to reduce their tax bills at such a high rate. According to the Organization for Economic Co-operation and Development these tax loopholes enable companies from all over the globe to avoid as much as $240 billion in corporate taxes every year; and it’s all legal. If the new rules, which have already been in the works for two years and would encourage the 60 countries involved to, be more open with tax information, go into affect they could put the clamps on these loopholes and bring governments a lot more money in tax revenue. If that happens, then some of these favorite vacation spots might end up being just for vacations.