There are no awards handed out for companies with the most money housed in overseas accounts, but keeping cash in tax havens is its own reward for at least a dozen top medical device makers, according to a new study.
Industry titans such as Medtronic (NYSE:MDT), Johnson & Johnson (NYSE:JNJ), Boston Scientific (NYSE:BSX) and St. Jude Medical (NYSE:STJ) have billions in cash stored in overseas subsidiaries in countries such as Bermuda, the British Virgin Islands and the Cayman Islands, where corporate tax rates are famously low or even non-existent.
"Companies can avoid paying taxes by booking profits to a tax haven because U.S. tax laws allow them to defer paying U.S. taxes on profits they report are earned abroad until they "repatriate" the money to the United States," according to the report. "Many U.S. companies game this system by using loopholes that let them disguise profits legitimately made in the U.S. as "foreign" profits earned by a subsidiary in a tax haven."
Some of the largest companies in the U.S. are avoiding paying billions in taxes by attributing part of their profits to subsidiaries in known tax havens. One such haven in the Cayman Islands, which has no income tax for companies incorporated there, lists more than 18,800 registered companies at a single 5-story office building, according to a report compiled by by Citizens for Tax Justice and the U.S. PIRG Education Fund.
This year’s more comprehensive list outlined offshore holdings for more than 380 companies, with several of medtech’s biggest players breaking the top 10%.
Medtech titan Medtronic was 28th on the list with a reported $20.5 billion housed in 37 offshore subsidiaries. Abbott Labs was even higher at 22nd with $24 billion housed in 79 subsidiaries, which is down from last year’s ranking, likely due in part to the spinout of its pharmaceuticals division. Johnson & Johnson cracked the top 10, ranking 8th with $50.9 billion divided among 60 offshore subsidiaries.
Representatives for the 3 companies didn’t respond to requests for comment.
The study examined 2013 reports to track down the number of subsidiaries that Fortune 500 companies hold in well-known tax-haven countries. Researchers then dug up the amount of money that each company attributed to those offshore businesses, looking for funds that companies refer to as "permanently reinvested" abroad. Although the use of tax havens is something of standard business practice to take advantage of provisions built into U.S. corporate tax codes, the authors described the practice as unjust.
"Congress has left loopholes in our tax code that allow this tax avoidance, which forces ordinary Americans to make up the difference," the authors wrote. "Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt."
At least 72% of Fortune 500 companies operated subsidiaries in tax havens in 2013, and some fare more aggressively than others. Just 6% of the Fortune 500 list account for more than 60% of the profits reported offshore for tax purposes, the authors wrote.
"Only 55 Fortune 500 companies disclose what they would expect to pay in U.S. taxes if these profits were not officially booked offshore. All told, these 55 companies would collectively owe $147.5 billion in additional federal taxes," according to the report. "To put this enormous sum in context, it represents more than the entire state budgets of California, Virginia, and Indiana combined."
In order of amount held in offshore subsidiaries, other medical device, lifesciences and healthcare companies listed in the report include:
| Company | Tax Haven Subsidiaries | Location of Tax Haven Subsidiaries | Amount Held Offshore ($ millions) | State Located |
| Pfizer | 128 | Bermuda(1), British Virgin Islands(1), Cayman Islands(1), Channel Islands(9), Costa Rica(2), Hong Kong(8), Ireland(28), Luxembourg(27), Netherlands(37), Panama(5), Singapore(7), Switzerland(2) | 69,000 | New York |
| Merck | 131 | Bermuda(12), Costa Rica(2), Cyprus(3), Hong Kong(4), Ireland(27), Lebanon(1), Luxembourg(1), Netherlands(46), Panama(5), Singapore(12), Switzerland(18) | 57,100 | New Jersey |
| Johnson & Johnson | 60 | Hong Kong(1), Ireland(23), Luxembourg(4), Netherlands(11), Singapore(1), Switzerland(20) | 50,900 | New Jersey |
| Amgen | 8 | Bermuda(3), Ireland(1), Netherlands(2), Switzerland(2) | 25,500 | California |
| Abbott Laboratories | 79 | Bahamas(2), Barbados(1), Bermuda(5), Cayman Islands(4), Costa Rica(2), Cyprus(1), Gibraltar (4), Hong Kong(3), Ireland(13), Lebanon(1), Luxembourg(7), Malta(1), Netherlands(22), Panama(2), Singapore(5), Switzerland(5), U.S. Virgin Islands(1) | 24,000 | Illinois |
| Eli Lilly | 26 | Bermuda(2), British Virgin Islands(3), Cayman Islands(4), Ireland(5), Netherlands(2), Singapore(2), Switzerland(7), U.S. Virgin Islands(1) | 23,740 | Indiana |
| Medtronic | 37 | British Virgin Islands(1), Cayman Islands(5), Ireland(6), Lebanon(1), Luxembourg(5), Netherlands(8), Singapore(2), Switzerland(9) | 20,499 | Minnesota |
| Baxter International | 12 | Costa Rica(1), Netherlands(3), Singapore(1), Switzerland(7) | 12,200 | Illinois |
| Boston Scientific | 42 | Bermuda(2), Costa Rica(2), Hong Kong(2), Ireland(12), Lebanon(4), Netherlands(14), Singapore(2), Switzerland(4) | 11,902 | Massachusetts |
| Kimberly-Clark | 44 | Bahrain(1), Barbados(1), Bermuda(2), British Virgin Islands(1), Cayman Islands(7), Channel Islands(2), Costa Rica(1), Cyprus(1), Hong Kong(2), Luxembourg(4), Malta(1), Netherlands(10), Panama(2), Singapore(8), Switzerland(1) | 9,800 | Texas |
| 3M | 12 | Hong Kong(1), Luxembourg(3), Netherlands(1), Singapore(4), Switzerland(3) | 9,700 | Minnesota |
| Gilead Sciences | 10 | Hong Kong(1), Ireland(6), Luxembourg(1), Netherlands(1), Switzerland(1) | 8,550 | California |
| Stryker | 38 | Barbados(1), British Virgin Islands(1), Cayman Islands(1), Hong Kong(6), Ireland(6), Lebanon(1), Luxembourg(2), Mauritius(1), Netherlands(12), Panama(1), Singapore(1), Switzerland(5) | 7,023 | Michigan |
| Celgene | 24 | Hong Kong(2), Ireland(2), Luxembourg(2), Netherlands(4), Singapore(1), Switzerland(13) | 6,129 | New Jersey |
| Agilent Technologies | 11 | Cayman Islands(1), Ireland(1), Luxembourg(2), Netherlands(2), Singapore(4), Switzerland(1) | 6,100 | California |
| Becton Dickinson | 38 | Bermuda(2), British Virgin Islands(1), Cayman Islands(3), Gibraltar (4), Hong Kong(1), Ireland(4), Luxembourg(8), Mauritius(1), Netherlands(5), Singapore(5), Switzerland(4) | 4,400 | New Jersey |
| McKesson | 1 | Ireland(1) | 4,200 | California |
| Allergan | 28 | Bermuda(4), Cayman Islands(2), Costa Rica(1), Hong Kong(2), Ireland(10), Luxembourg(2), Netherlands(3), Netherlands Antilles(1), Singapore(1), Switzerland(2) | 3,828 | California |
| Biogen Idec | 14 | Bermuda(1), Hong Kong(1), Ireland(1), Isle of Man(2), Luxembourg(1), Netherlands(2), Singapore(1), Switzerland(5) | 3,800 | Massachusetts |
| St. Jude Medical | 10 | Costa Rica(1), Hong Kong(1), Luxembourg(2), Netherlands(2), Singapore(2), Switzerland(2) | 3,600 | Minnesota |
| Cardinal Health | 10 | Bermuda(1), Cayman Islands(2), Hong Kong(1), Ireland(1), Luxembourg(1), Malta(1), Netherlands(1), Singapore(1), Switzerland(1) | 1,800 | Ohio |
| Phillips | 17 | Bermuda(4), Cayman Islands(7), Ireland(4), Singapore(1), Switzerland(1) | 1,700 | Texas |
| Henry Schein | 1 | Switzerland(1) | 694 | New York |
| UnitedHealth Group | 19 | Bermuda(1), Cayman Islands(3), Hong Kong(1), Ireland(2), Luxembourg(5), Netherlands(5), Singapore(2) | 359 | Minnesota |
