Tax

Walmart Has $76B of Assets in Tax Havens: Report

'Walmart’s entrance into the world of tax havens is especially notable because the retail industry has not been known for this kind of activity.'
Katie Kuehner-HebertJune 17, 2015

Walmart has $76 billion of assets in overseas tax havens, according to the report, “The Walmart Web: How the World’s Biggest Corporation Secretly Uses Tax Havens to Dodge Taxes,” researched by the United Food & Commercial Workers International Union and published Wednesday by Americans for Tax Fairness.

According to the report, Walmart has 78 undisclosed subsidiaries and branches in 15 overseas tax havens, which may be used to minimize foreign taxes where the company has retail operations and to avoid U.S. tax on those foreign earnings.

“Walmart’s preferred tax haven is Luxembourg, dubbed a ‘magical fairyland’ for corporations looking to shelter profits from taxation,” the authors wrote. “Walmart may be skirting the law as there is a legal requirement to list subsidiaries that account for greater than 10% of assets or income.”

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The authors pointed out a specific practice that governmental authorities should scrutinize: Walmart’s offshore subsidies giving low-interest, short-term “hybrid loans” to U.S. affiliates, enabling the offshore units to generate roughly $1.5 billion worth of tax deductions in Luxembourg each year by making phantom interest payments to the U.S. global parent.

“Walmart’s use of intercompany debt permits it to avoid taxes overseas,” the authors wrote. “[The company] strips earnings out of higher-tax countries by taking out intercompany loans and pays interest to itself in tax havens where the interest income is taxed lightly or not at all.”

Walmart spokesman Randy Hargrove told Bloomberg that the report was incomplete and was “designed to mislead.” He said the company has “processes in place to comply with applicable SEC and IRS rules, as well as the tax laws of each country where we operate.”

Specifically, Hargrove said that Walmart was following Securities and Exchange Commission guidance that permits companies to avoid disclosure of subsidiaries with significant “intercompany transactions.” He said Walmart’s tax savings overseas was driven by lower rates in markets including Canada and the United Kingdom.

“The report comes a week after the Group of Twenty nations unveiled its latest effort to combat multinational corporate tax avoidance,” Bloomberg wrote.

“The body wants companies to disclose to regulators where they book profits,” and sales, and have employees, “so tax authorities can be aware of discrepancies between where corporations report income and where they have operations.”