Wal-Mart Stores, Inc. (NYSE:WMT), the retailing giant that was known for its deceiving tax tactics in the past, has come to limelight as a recent report reveals that the company might be hiding $76 billion in tax havens.
According to the recent study published by the Union Food & Commercial Workers International Union, Wal-Mart Stores, Inc. (NYSE:WMT) has more than 78 subsidiaries offshore and none of them has been recorded in the US securities filings. The report also reveals that the company has successfully cut more than $3.5 billion in taxes due to its overseas operation.
Tax Havens and Offshore Benefit
American companies take advantage of a loophole in the American tax laws that permit American companies to reincorporate abroad with just 20 percent foreign ownership. This means that companies then can act as a subsidiary of their foreign based company and get huge tax cuts and concession in IRS obligations.
Last year, American pharmaceutical company AbbVie took advantage of this loophole to technically lose its corporate citizenship. Many companies like Google Inc (NASDAQ:GOOGL), Apple Inc (NASDAQ:AAPL), Xerox have used similar strategies to save tax expenses.
Wal-mart, Luxembourg and Netherlands
According to a report from Americans for Tax Fairness, nearly 90 percent of Wal-Mart Stores, Inc.’s (NYSE:WMT) foreign assets are owned by the company’s subsidiaries located in Luxembourg and Netherlands. The Netherlands and Luxembourg are popular in the corporate world as tax havens. Wal-Mart Stores, Inc. (NYSE:WMT) pays less than 1 percent tax in Luxembourg. The company has no stores in the country, yet, the units in Luxembourg report profits of $1.3 billion in last three years if the report is to be believed.
The Union And The Report
The Union that researched this report, supports the Organization United for Respect at Wal-Mart. Wal-Mart has traditionally been known for discouraging unions. Randy Hargrove, a spokeswoman for the company, called the report as ‘incomplete’ and said that it was designed by Union authors to mislead.
However, the report comes just in time as the international community decides to investigate multinational corporate tax avoidance. The effort, which focused only tech giants so far, may also include Wal-Mart stores, Inc. (NYSE:WMT). It remains to be seen how this turmoil affects the corporate world.