Walmart got a modest lift to its reputation when it announced that it was lifting wages for many of its 1 million-plus employees. But a report released today by Americans for Tax Fairness reminds us that Walmart is still a tax cheater, robbing the public of revenue that would cover the cost of the vital services that Walmart customers, employees – and, yes, Walmart itself – use every day.
“This report reveals that Walmart has placed at least $76 billion worth of assets in 78 subsidiaries located in 15 tax havens in which it has no retail stores,” the report said.
These are subsidiaries that have not been previously reported because Walmart has not disclosed them in its filings with the Securities and Exchange Commission. The only plausible reason for their existence, the report says, is to avoid U.S. corporate taxes on the money stored in these havens and to do so in secret, the report said.
The subsidiaries have “obscure names like Azure Holdings or MCLM III, which turns the simple task of identifying them into a major investigative effort,” the report said. “Compiling the data for this report required hundreds of hours of labor to discover these subsidiaries and unearth financial records from Washington to Switzerland, London to Luxembourg, and South Africa to Central America” – and what is disclosed here may not even be the complete accounting of what Walmart has hidden overseas, the report said.
This type of tax avoidance is most often associated with companies in areas such as technology, pharmaceuticals and finance, where it is easy to shunt patents and intellectual property into offshore corporations and funnel profits derived from those assets through those offshore havens, even though the actual sale is in the U.S. That type of financial engineering is usually not seen with retail bricks-and-mortar chains, simply because the sales are concretely tied to in-person store transactions. That’s why Walmart until now does not show up prominently in the list of the country’s top tax evaders.
Among the findings in the report is that Walmart may be exploiting a loophole in the tax code to gain access to these offshore profits without paying the tax that would be due once that money was brought into the U.S. The loophole allows companies to take out short-term, low-interest loans on the offshored profits. Walmart took $2.4 billion in short-term loans from seven of its Luxembourg subsidiaries in an apparent effort to take advantage of this loophole, according to the report.
The report calls for a Securities and Exchange Commission investigation into Walmart’s use of these subsidiaries and its failure to properly disclose their existence. It also calls for an IRS investigation into Walmart’s use of tax havens and its use of borrowed funds from those havens.
“We lose about $90 billion a year in federal revenue due to corporate use of tax havens to dodge taxes,” the report concludes. “When governments at every level struggle to fund basic services such as education, transportation and health care, corporate tax dodging makes it that much harder. … The offshore tax avoidance tools at Walmart’s disposal are not available to smaller, local retailers. And when large corporations avoid taxes, the rest of us have to make up the difference.”