The Offshoring Explosion

A complex tax code gives a competitive advantage to large corporations, which have the resources to exploit it. One favored tactic is offshoring profits—setting up shell companies in countries that have lower corporate tax rates or offer incentives, such as Bermuda, Ireland, Singapore, and Switzerland.

In 1966, roughly 5% of corporate profits were booked in tax havens abroad. But corporations soon realized the easiest way to increase shareholder value was to not pay taxes, and by 2000 well over a quarter of their profits were registered in tax havens. By 2016, that share had increased to more than half.

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Share of U.S. Multinational Corporate Profits Booked in Foreign Tax Havens

Source: National Bureau of Economic Research.

Note: Includes all non-oil sectors.