President Obama and Treasury Secretary Tim Geithner announced on Monday a crackdown on offshore tax havens that could produce $210 billion in new tax revenue over the next decade.
The White House will face opposition to the proposal from the business community and Congress. Before the announcement, a Republican leadership staffer circulated an email citing a Bloomberg report saying the proposal "would be the biggest tax increase on U.S. corporations since 1986." And Senate GOP leader Mitch McConnell (Ken.) said later on Monday that he could not endorse Obama's plan since it "gives preferential treatment to foreign companies at the expense of U.S.-based companies."
But the amount Obama's plan would reportedly save is a far cry from the estimated $1 trillion the United States loses to offshore tax havens over a ten-year period. A 2008 Senate report (PDF) estimated that "the United States loses an estimated $100 billion in tax revenues due to offshore tax abuses" every year.
In January, the Government Accountability Office issued a report (PDF) that found that 83 of the 100 largest publicly traded U.S. corporations reported subsidiaries in countries listed as tax havens or "financial privacy jurisdictions."
Many of those corporations are beneficiaries of billions in taxpayer dollars under the Troubled Asset Relief Program. Morgan Stanley, for instance, boasts 273 subsidiaries in tax havens, with 158 in the Cayman Islands alone. Citigroup's got 427, with 90 in the Cayman Islands, and 59 of Bank of America's tax-haven subsidiaries are there as well.
The GAO found 18,857 businesses are registered at just one address in the Cayman Islands -- the "Ugland House." The report said that "Ugland House registered entities included investment funds, structured-finance vehicles, and entities associated with other corporate activities."
The Treasury Department pooh-poohed the GAO's list of countries because there is no agreed-upon definition of a tax haven. "Even though coming up with a list of countries has significant appeal, any list of countries is likely to be under-inclusive as well as over-inclusive," the Treasury wrote. "Moreover, because any such list is likely to be regarded as a blacklist and may be used as the basis for the imposition of sanctions or other negative measures, such a list may inappropriately negatively affect our economic and other relations with listed countries."
On tax day, April 15, the U.S. Public Interest Research Group issued a report with a state-by-state breakdown of the cost to taxpayers of corporate tax evasion in offshore havens.