On his first day back in office, President Trump ended U.S. participation in a 13-year effort to rein in the use of tax havens and establish a global minimum tax, signing a presidential memorandum that declared that commitments made under the “Global Tax Deal” sponsored by the Organization for Economic Cooperation and Development have “no force or effect” domestically unless formally adopted by Congress. According to a new analysis, that decision has enabled corporations to avoid at least $40 billion in income taxes since the beginning of last year. “A New York Times review of securities filings from nearly 500 companies showed that they avoided taxes by attributing hundreds of billions of dollars in earnings to low- or no-tax foreign locales like Cyprus, Bermuda, Switzerland and the Cayman Islands,” Jesse Drucker and Dylan Freedman wrote in the Times on Friday. “Often, corporations funneled the profits through subsidiaries in places where they had no employees, offices or customers.” In one example provided by Drucker and Freedman, Abbott Laboratories, a $150 billion pharmaceutical company headquartered in Illinois, has reduced its tax bill by claiming all global profits in Malta — an island in the Mediterranean where it has no employees. The move saved the company about $336 million last year. Abbott previously used Bermuda as a tax shelter, but the island voted to start enforcing OECD tax rules starting in 2025. Two weeks before the OECD laws were to take effect, Abbott moved the tax residency of its Bermuda subsidiary to Malta. In its first year, the Malta Abbott unit reported $17 billion in income — and no income taxes paid anywhere. While many of the moves to avoid taxes made by corporations like Abbott are legal, the IRS has raised questions about some tax maneuvers. In Abbott’s case, the IRS is challenging about $1 billion in tax savings, charging that Abbott took steps that lacked economic substance just to avoid paying taxes. Some analysts say they are worried that the Trump administration’s rejection of a more consistent global tax structure will make it more likely that companies push the limits of tax avoidance. “Accommodating the U.S.’s refusal to participate in the global reforms opens up the door to abuse,” one tax attorney told the Times.
