A new report tries to quantify how much revenue the state misses out on each year because of tax dodging. According to the report released Tuesday by Illinois PIRG (Public Interest Research Group), companies and individuals who hid income in offshore tax havens cost the state $108.3 million per year. Illinois PIRG advocate Dev Gowda says most of the country’s largest companies take advantage of these loopholes.
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“Right here in Illinois, Caterpillar disclosed maintaining 46 tax haven subsidiaries and has about $15 billion overseas in tax havens,” Gowda said. In most cases, this is legal, and Caterpillar is not accused of breaking any laws. One solution, Gowda says, is the close what’s called the “water’s edge” tax loophole. Designed to allow companies to exclude foreign profits so they aren’t double taxed, it’s instead used to hide profits actually earned in the United States.
State legislatures in Montana and Oregon have closed the loophole by requiring companies that have subsidiaries in known tax havens to include those profits in their state tax returns.