US corporations avoid paying billions of dollars in tax by moving money offshore.

Earlier this week Google was found to have avoided paying $2bn in tax by channelling $9.8bn from international subsidiaries into Bermuda, which has no corporate income tax.

"This [tax avoidance] is probably the biggest issue facing governments over the next century, not counting climate change. Whether or not states across the globe can continue to fund themselves as we continue to have this yawning inequality, these corporate profits and executive profits if they can move them around, and governments can't capture them then it's a real problem."

- Ryan Grim, the Washington bureau chief for The Huffington Post

The practice is perfectly legal, and Eric Schmidt, the company's chairman told Bloomberg that he was proud of Google's tax structure.

Numerous corporations use tax havens but a US senate committee investigation found that five of the top 10 companies with the biggest offshore cash balances are in the technology sector.

These include Hewlett-Packard and Microsoft, who shifted $21bn offshore between 2009 and 2011.

It is estimated that offshore tax avoidance costs the US government $150bn annually, and at a time when Washington is fixated on the debate over the so-called fiscal cliff, there seems to be little political will to address the problem.

This contrasts to attitudes in Europe.

When it was revealed how little tax companies including Starbucks and Amazon have paid in the UK, there was a public outcry and parliamentary hearings were held.

Tax evasion costs the EU about $1.3 trillion a year. It has drawn up an action plan to try and claw back at least some of the revenue being lost.

"There's a risk also if you try and change the [tax] rules in a way that is significantly adverse to the interests of these large companies that they will not just be shifting dollars around but they'll be shifting jobs around."

- Eric Savitz, the San Francisco bureau chief for Forbes

The European Commission wants member states to create a tax haven blacklist and adopt anti-tax abuse rules.

Bermuda and the Cayman Islands are well-known tax havens.

In this episode of Inside Story Americas we ask: Can tax avoidance be stopped?

Joining the discussion with presenter Kimberly Halkett are guests: Eric Savitz, the San Francisco bureau chief for Forbes magazine; Nicole Tichon, the executive director of Tax Justice Network USA; and Ryan Grim, the Washington bureau chief for The Huffington Post.

Google declined Al Jazeera's invitation for a representative to join the panel discussion.

"The problem is, we need to change the system. We need the government to finally take this on. This is something that is going on all over the world, it's this race to the bottom on taxation. It's not companies competing with other companies, its governments competing with each other."

Nicole Tichon, the executive director of Tax Justice Network USA

WHO AND HOW MUCH - following an analysis of this year's financial reports of 285 Fortune 500 companies, the Center for Tax Justice found:

  • Based on information released by the corporations themselves they had more than $1.5 trillion kept overseas by the end of 2011
  • The profits of just 10 corporations account for 1/6 of this amount, or roughly $209bn
  • Microsoft, Apple, Eli Lilly, Amgen and Dell top this list
  • The centre says these corporations have enough financial information to indicate they have paid little or no taxes on their offshore money to any government
  • Another watchdog group, the Tax Justice Network, estimates that offshore corporate holdings equal about 1/3 of total global assets

What could be done with the avoided taxes:

  • US-based Public Research Group estimates that generally tax havens allow corporations and the wealthy to avoid paying $150bn in US taxes every year, which could be used to:
  • Provide loan guarantees for an additional 500 million small businesses
  • Fund four years of free school breakfasts and lunches for twice the number of low-income students receiving them now
  • Provide a tax cut of $1,068 for every person who files taxes in America

Source: Al Jazeera