Abbott (NYSE:ABT) parked some $40 billion in 107 overseas tax havens last year, making it 1 of the top 15 U.S. companies with the most money held offshore, according to a U.S. Public Interest Research Group report issued last month.
Johnson & Johnson (NYSE:JNJ) put $49 billion into 55 havens around the globe in 2012, including 1 in the Cayman Islands, which has no income tax for companies that incorporate there. More than 18,500 companies use the same address to register in the Caymans, according to U.S. PIRG.
"Simply by registering subsidiaries in the Cayman Islands, U.S. companies can use legal accounting gimmicks to make much of their U.S.-earned profits appear to be earned in the Caymans and pay no taxes on them," according to the report.
That’s because U.S. tax laws allow companies to defer paying taxes on profits booked by their overseas subsidiaries until the cash is "repatriated" into the U.S. Although perfectly legal, these tax havens allow firm to avoid the 35% corporate tax rate levied by the IRS – even though the cash is held in U.S. banks or invested in American assets, according to the research group’s report.
"A Senate investigation of 27 large multinationals with substantial amounts of cash supposedly ‘trapped’ offshore found that more than half of the offshore funds were invested in U.S. banks, bonds, and other assets. For some companies the percentage is much higher," according to the report.
Abbott’s 107 tax havens span the globe, according to its annual financial report, from the Caribbean to China. Johnson & Johnson’s subsidiaries are also found all over the world, in countries including Ireland and Singapore, according to the U.S. PIRG study.
McKesson (NYSE:MCK) also made the group’s list, having booked $3.8 billion to an Irish subsidiary. Cardinal Health (NYSE:CAH) put $2.2 billion into 11 havens around the globe, according to U.S. PIRG, and 3M Cos. (NYSE:MMM) parked $8.6 billion in 13 offshore tax havens.