Walmart's use of tax havens revealed in new report

Walmart has built a web of 78 subsidiaries and branches in offshore tax havens where it is sheltering up to $76 billion US in overseas profits, most of it unreported to the U.S. Securities and Exchange Commission, according to a new report.

The retailer's use of tax havens was revealed in a study called The Walmart Web: How the world's biggest corporation secretly uses tax havens to dodge taxes, released by Americans for Tax Fairness on Wednesday.

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It was researched by the United Food & Commercial Workers International Union using public documents filed in jurisdictions around the world.

Walmart has set up units in 15 low-tax havens, that may be used to minimize foreign taxes from countries outside the U.S. where it has retail operations, including Britain, Brazil, Japan and China.

It is also able to avoid U.S. taxes on those foreign earnings, as much as $3.5 billion USin the past six years, the report estimates.

22 Luxembourg shell units

Walmart has 22 shell companies in Luxembourg, 20 established since 2009, though it has no Luxembourg retail outlets. Its units there reported $1.3 billion in profits between 2010 and 2013 and paid tax at a rate of less than one per cent, according to the report.

The report estimates 90 per cent of the assets in Walmart's international division and 37 per cent of its total assets are stored in offshore accounts.

The retailer also uses sophisticated tax-shifting techniques, using inter-company loans to shift earnings out of higher-taxed countries and paying interest to itself in tax havens.

The report speculates that Walmart is playing a long game, deferring foreign earnings now and hoping the U.S. will bring in legislation that will allow it to repatriate low-taxed foreign earnings at a preferred rate.

Walmart response

Walmart spokesman Jo Newbould pointed out that Walmart paid $6.2 billion in tax last year in the U.S. and says the companyhas "processes in place to comply with applicable SEC and IRS rules, as well as the tax laws of each country where we operate."

"The report is fromthe same union-supported group that regularly issues similar, flawed reports on Walmart to promote their agenda rather than the facts. This latest report includes incomplete, erroneous information designed to mislead readers," Newbould said in an email statement.

He dismissed the idea that Walmart would benefit from a change in rules on repatriating funds from overseas operations.

"Just as the company uses funds generated from the U.S. market to continue to invest in stores, wages and growth in the U.S., we keep a large portion of foreign earnings in international markets where they are reinvested for growth," he said.

Call for SEC, IRS probe

"Regardless of where the foreign earnings are held, under the current law, they are not subject to U.S. tax until they are repatriated. Even so, and even with non-U.S. operations comprising nearly 30 per cent of Walmart's revenue, Walmart had an effective tax rate of approximately 32 per cent over the past three years."

The union behind the study, the United Food & Commercial Workers International Union, has helped the lead the fight for wage increases and more predictable schedules at Walmart stores.

It has called for an investigation of Walmart's overseas tax structure by the SEC and Internal Revenue Service. It also suggest the European Commission look into whether Luxembourg is providing Walmart with sweetheart tax deal.

Under current rules, the SEC does not require reporting of overseas units below a certain percentage of company operations. That means companies may not have to list small units in low-tax havens.

The report is bound to increase pressure for an international tax treaty that uncovers cash stored in tax havens and ensures each country gets a fair share of corporate taxes.