© KEVORK DJANSEZIAN/Reuters/Corbis

The retail behemoth is in the tax spotlight. Will things change for corporations? © KEVORK DJANSEZIAN/Reuters/Corbis

Wal-Mart, the world’s largest retailer, is both loved by millions of bargain-seeking consumers and hated by millions of others, including activist groups who see it as the epitome of corporate greed.

The Bentonville, Arkansas-based company also might be the catalyst that prompts Congress to finally act on long-stalled tax reform.

This week the Americans for Tax Fairness, or ATF, a liberal-leaning Washington, D.C., consortium of other advocacy groups, released a report charging Wal-Mart with using an “extensive and secretive web of subsidiaries located in countries widely known as tax havens.”

And although ATF questions the legality of some of Wal-Mart’s financial moves, most tax experts say the company is adhering to convoluted corporate tax laws.

Wal-Mart in Luxembourg

So just what is Wal-Mart accused of doing in the international tax arena?

ATF says that research compiled by the United Food & Commercial Workers International Union shows Wal-Mart has 22 shell companies in Luxembourg. Twenty of the companies were established since 2009 and five in 2015 alone, according to the report.

But as for retail outlets, ATF says that Wal-Mart does not have one store in that European nation, which is infamous as a tax haven country.

Dollar-wise, ATF says Wal-Mart has transferred ownership of more than $45 billion in assets to Luxembourg subsidiaries since 2011.

And as for taxes, the company reported paying less than 1 percent in tax to Luxembourg on $1.3 billion in profits from 2010 through 2013.

Added to a long international tax list

Wal-Mart is not alone in using its global presence to trim, or even eliminate, its U.S. tax liability. Other well-known American firms with worldwide reaches — Apple, Amazon, Starbucks, Goodyear Tire and Wynn Resorts to name a few — have managed to pay the U.S. Treasury very little or even nothing by making specific tax code moves.

Typically, these companies set up subsidiaries in lower tax nations and get U.S. tax credits for the payments they make abroad. Others move their corporate headquarters to a foreign location, on paper at least — a process known as inversion.

Problem with repatriation

But would changes to the U.S. international tax system be better or worse? One of the most frequently discussed ways to return U.S. companies fully to the domestic tax fold is to offer incentives.

This possibility, contends ATF, is part of what it calls the big box retailer’s long game.

Wal-Mart, says the advocacy group, “apparently hopes the U.S. Congress will reward its use of tax havens by enacting legislation that would allow U.S.-based multinationals to pay little U.S. tax when repatriating current low-taxed foreign earnings (such as to fund infrastructure spending) and pay no tax with the adoption of a territorial tax system.”

Tax change isn’t easy or cheap

Point taken. But any tax code changes will produce winners and losers. The goal is to offset the short-term losses in exchange for longer-term corporate tax benefits — not for just the companies, but also for Uncle Sam.

Changes to U.S. taxation of multinational companies already have been getting a closer look. Our combined state/federal corporate tax rate of 39 percent is the highest among global developed countries and there is bipartisan agreement that changes need to be made to bring that rate down so that truly U.S.-based firms remain internationally competitive.

Now that Wal-Mart’s role in corporate tax-reduction maneuvers is under the spotlight, the company’s size and notoriety might just spur Congress to finally make some Internal Revenue Code changes.

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