Report says Walmart stashing billions overseas
The phrase "economic patriotism" has been thrown around in recent years to put pressure on U.S.-based multinational corporations to stop using accounting maneuvers and legal loopholes to avoid paying their "fair share" of taxes in the U.S. The latest company to come under the spotlight is Walmart following claims it has cut its tax bill by $3.5 billion over the past six years by reporting profits at subsidiaries in tax haven countries around the globe.
Critics of a report of the allegations, published by Americans for Tax Fairness, might point out that it was researched by the United Food and Commercial Workers Union (UFCW), which has long sought to organize Walmart’s workers. Walmart maintains the company is in compliance with IRS and SEC requirements and that the report is misleading.
According to the report, Walmart has 78 subsidiaries and branches in 15 countries overseas. Ninety-percent of the chain’s overseas assets are owned by subsidiaries in the tax haven nations of Luxembourg and the Netherlands. Walmart has no stores in Luxembourg, but its subsidiaries there reported profits of $1.3 billion that were taxed at less than one percent.
Walmart President and CEO Doug McMillon – Photo: Walmart
One of the main criticisms of Walmart in the report is the company’s lack of transparency. The company’s dealings "have remained largely invisible, in part because Walmart fails to list them in its annual 10-K filings with the U.S. Securities and Exchange Commission (SEC)."
"This report is continuing evidence that everybody has been engaging in cross-border tax avoidance," Stephen Shay, a professor at Harvard Law School and former deputy assistant secretary for international tax affairs for the Obama Treasury Department, told The Washington Post.
Discussion Questions
Will the Americans for Tax Fairness report hurt Walmart? What is your position on the use of overseas tax shelters by U.S.-based corporations?
Poll
BrainTrust
Dr. Stephen Needel
Managing Partner, Advanced Simulations
Steve Montgomery
President, b2b Solutions, LLC
The report won’t hurt Walmart. To most consumers it’s a non-issue. Congress needs to pass legislation that will end this practice.
No, it won’t hurt them all — everybody gets tax avoidance. If the tax shelters exist, they should use them, just like we, as individuals, use the tax shelters available to us (IRAs, for example).
Walmart will not be hurt by this report. Their base has far more to be concerned with than corporate goings-on. Besides, Apple has been doing questionable accounting maneuvers off-shore and their customers keep on buying.
The real question is what competitors will make of it. How many of them are engaged in similar practices, and how many that aren’t will push for sanctions to level the playing field?
For Walmart — lots of noise, but no real impact.
Admittedly mine may not be the popular view on their tax practices. While it may seem inappropriate for Walmart (amongst many others) to hold a large portion of the income overseas or to have subsidiary companies in tax-friendly countries, it is not apparently a violation of our tax laws.
If it is determined that this practice is something the voters don’t support they need to elect representatives who will support changing our tax laws.
Do you blame Walmart for this issue? I am no fan of them, but having legal tax shelters is something many corporations do. Unless we change our laws, nothing is going to change. With this wave of social justice and new mandates, any sane company is not going to get gouged here and will take their money where it is safer. I don’t see any politician out there who really understands basic economics, as their hands are always open for more ways to increase revenue for our wasteful government.
I have 20 euro left over from my trip to Italy, so maybe I’m part of the problem too.
Shedding light on corporations that leverage overseas tax havens will at least allow shoppers to make their purchasing decisions based on more insight and information. It may not be illegal but it’s at least worthwhile to place the information into the court of public opinion. Although Walmart is not alone in this practice, I find it hollow and it shows how everything is driven by money. On one hand, Walmart uses its PR machine to bolster its brand by making certain everyone was aware of their “sensitivity” and support of their employees by announcing their increase in minimum wage, but the legal and financial department are quietly using tax shelters to hide their incredible profits. Lame!
Competition is good. Between firms it promotes lower costs and better products. Between governments it drives sound resource allocation and good governance of the public budget, as the IFC has found.
Competing on tax efficiency is fair game for firms and governments.
Operating efficiencies and product and service improvement have made global companies like Walmart, Amazon and Apple among the most admired companies in the world. They have also been criticized for tax policies that provide them with more capital for hiring employees and rewarding investors.
Competition is good for societies. Unless the world agrees on global tax homogeneity, taxes will be part of the game. Critics need to realize that where competitive advantage exists, it will be harnessed.
Total non-issue. They’re doing what just about every other U.S. corporation is doing. They’re in business to provide the highest return to their shareholders and not the U.S. government.
Wow. Really? I’m the only person here who thinks this is disgraceful? If this doesn’t rile you up there’s something wrong with you.
Don’t count on your Congress — bought and paid for by huge corporations — to fix this.
Hear, hear, Cathy Hotka! I imagine Walmart is not doing anything illegal, but that doesn’t make it right, and neither does the “everybody else does it” excuse.
Walmart and many other large chains proudly tout their “made in the USA” products and represent themselves as champions of all things American. Stashing earnings in countries where you don’t even do business doesn’t fit well with that storyline and doesn’t pass the smell test either.
Meanwhile, our infrastructure is crumbling, and one could say that part of the reason is large companies and wealthy individuals use strategies to avoid paying taxes on what they earned here, from American consumers, to the U.S. government.
At some point we are going to have to realize that this “everyone and every corporation for themselves” mentality is not going to play out well in the long run.
Companies should use every avenue to build return for their shareholders.
That being said, there seems to be a feeling in this country that U.S. based corporations should pay taxes on their global business. The top 100 U.S. corporations (other than financial institutions) get just over half their revenue from abroad. They should pay the taxes there, not here.
The future of business is overseas.
I hope it does! I think the US Government (Congress) needs to evaluate our corporate tax rules and probably relax them. Then we need to close the loopholes and prosecute violators.
The report will not affect them. Everybody tries to minimize what they pay in taxes. From a moral perspective, it would be nice to think that large companies such as Walmart will voluntarily pay more tax than they are legally required to—in which case their shareholders would be irate, and their competitive position would likely erode.
I do think there is a place for companies to establish a highly ethical position, make it a core part of their brand, and be rewarded by consumers who appreciate their doing the right think in spite of not strictly needing to—Ben & Jerry’s comes to mind. This is easier when made a part of the culture from the very beginning. It would take a leader of incredible strength and integrity to do that at a company the size of Walmart, and the Board would need to be completely aligned behind them; otherwise, any stumbles in revenues or margins would immediately be blamed on the new policy of valuing ethics over results.
Corporate tax collections as a percent of total US revenues (please forget arguments about “rates”—it’s actual collections that really count) have dropped to an average of 9.9% since President Reagan took office. That’s way down from Pre-WW2 17.1% average rate, WW2 @ 32.7%, and post war thru 1969 @ 24.5%. Corporations are simply not paying their fair share.
Corporations have absolutely had a great return on their lobbying investments to create loopholes to permit low effective tax rates. Walmart’s behavior is indeed in line with many other large corporations. They can’t be expected to be “patriotic” and re-patriate their earnings to pay taxes when their competitors won’t. So it’s up to our elected Congress and President to make the changes.
That said, shaming corporations, from Apple to Walmart, makes sense as one tool in a plan to bring a semblance of fair taxation back. If anyone would like the raw data I used to calculate my percentages, here’s the link.
Not hurt at all. Nearly every American is a Walmart stockholder in one way or another. If not they are a Walmart shopper. If Walmart saves money it comes back to the citizens either by dividends, capital gains, or savings on shopping.
It certainly won’t hurt Walmart. Walmart consumers just want what they want at the lowest price—period. They don’t care where it was made, what the workers’ conditions are, if anyone was exploited to get it, or taxes were paid to the United States or anywhere else for that matter.
It’s quite simple. If there wasn’t a tax rate to avoid, there wouldn’t be overseas shelters. Or at least there would be fewer of them. If you don’t want major corporations to avoid taxes, don’t give them a reason to avoid them. Quite ironic that those who support the corporate tax rates being so high would rather have zero revenue than the treasury overflowing.
It seems unlikely that anyone will take the Americans for Tax Fairness very seriously when this report is really just another union supported attack on Walmart. The bigger question should be “is Walmart doing something wrong regarding taxes?” As a former SVP Finance and Treasurer of an S&P 500 retailer, the answer is “no.”
“Avoiding” taxes using cross border tax planning is not illegal, immoral, or unseemly. Warren Buffett does not pay more tax than required, neither do corporations, and neither do I. And, there is nothing wrong with leaving earnings overseas rather than repatriating them and paying US taxes on them. If the money comes back to the states the cash is “reduced” by 40%. It is pretty easy to find foreign investments than do better than losing 40%. Walmart management would have to be [stupid] to repatriate funds if they have anything to invest in abroad…and they do.
US companies doing business abroad would have to be [stupid] to pay US taxes or more foreign taxes than needed, on their foreign earnings. This is a tempest in a teapot. What the US needs is very low marginal tax rates and no deductions which will drive investment in the US and growth. If the government took that approach, they would not have to be whining about “tax avoidance.”
Can you blame Walmart? Reduce regulation and taxes, then watch the money pour back into the U.S.
It seems to me that an organization that is for tax fairness would applaud Walmart for taking advantage of the loopholes to legally avoid the oppressive US corporate income tax.
While the US tax rate is quite high, the government does understand this and allows all those loopholes. The government wants corporations to take advantage of these loopholes, otherwise they would not have established them in the tax code. Its no different that putting coupon in your ad. Some will use it and some won’t. But don’t complain if they do.
All large companies do this and Walmart is singled out only because they are so large. It’s just a biased and alarmist report. At the end of the day, I would guess of all the companies doing more than $500 billion in sales, Walmart probably generates the most overall taxes, such as income, sales, property, and payroll.
I somewhat disagree with the other comments that this won’t hurt Walmart, but I do agree the fault lies with Congress and our laws that allow this. The reason I say it will hurt Walmart is because this is yet another negative Walmart story and these things have a cumulative effect. If the lion’s share of your advertising is devoted to shoring up your corporate image you have a problem.