NEW YORK — U.S. multinational companies are saving $100 billion a year by shifting their profits overseas to lower their tax bills, according to a study released Tuesday that found that corporate tax-dodging is a bigger problem than previously estimated.
Most U.S. companies pay far less than the country’s 35 percent tax rate and are using a multitude of maneuvers to keep their tax bills low, according to the study by Kimberly A. Clausing, an economics professor at Reed College. The study will be presented this week by the Washington Center for Equitable Growth, a D.C.-based think tank.
In addition to merging or buying smaller foreign firms and moving their headquarters overseas to lower their tax rates, known as an inversion, companies also assign patents to subsidiaries in countries in which the profits made from them will be taxed at a lower rate, the report says.
“It is a much bigger issue than just inversions, that is just the tip of iceberg,” Clausing said in an interview.
Most of the profits are being shifted to countries — Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland — where the effective tax rate is less than 5 percent, the report says.
“There is indisputable evidence that the erosion of the U.S. corporate income tax base is a large and increasing problem,” the report says.
Clausing said she analyzed survey data from the U.S. Bureau of Economic Analysis on U.S. multinational firms and found that the amount lost to these types of tax maneuvers has accelerated over the past decade.
Tax revenue lost to profit shifting in 2012 was $77 billion to $111 billion and will reach about $94 billion to $135 billion this year, despite repeated Treasury Department efforts to curtail such maneuvers, the study found.