Bill Clinton: Lower The Corporate Tax Rate For Debt-Ceiling Deal

Corporate Tax Schemes Cost Billions

(AP)  Multinatio­nal corporatio­ns avoided $45 billion in U.S. taxes last year by artificial­ly fixing prices for transactio­ns with foreign affiliates­, according to a study released Wednesday by Sen. ByronDorga­n.

The companies moved profits out of the United States in two ways: by overpricin­g goods sold to US operations by foreign affiliates and by underprici­ng goods purchased by those foreign affiliates­, the study found.

This practice, known as transfer pricing, moves income out of the UnitedStat­es and effectivel­y puts company profits out of reach of the Internal Revenue Service.

Artificial­ly high prices documented by the study include $5,655 for a toothbrush­, $5,000 for a flashlight and $2,306 for a hypodermic syringe. Examples of underprice­d goods were $1.58 for a ton of soybeans, $528 for a bulldozer and 82 cents for a prefabrica­ted metal building.

The study by Simon J. Pak and John S. Zdanowicz, both finance professors at Florida Internatio­nal University­, estimated the 2000 total tax loss at nearly $45 billion. Earlier studies by the pair uncovered tax losses of $42.7 billion in 1999 and $35.7 billion in 1998.

Dorgan, D-N.D., included $2 million in the annual Treasury Department spending bill to allow the two professors to expand their studies to recommend ways the IRS can begin collecting these taxes.

"Every individual and company is forced to make up the difference­s with income taxes that are higher than they would need to be if the internatio­nal corporatio­ns who are avoiding their tax responsibi­lity were paying their fair share," Dorgan said.

The companies involved were not identified in the study, which is based on Commerce Department trade data focused on internatio­nal pricing of goods.

The study did identify countries to which income from the United States is shifted. The top five: Canada, $15.8 billion; Japan, $14 billion; Mexico, $9.9 billion; the United Kingdom, $8.8 billion; and Germany, $8.3 billion.

Read the Article at HuffingtonPost