The tiny European nation of Luxembourg is home to precisely zero Walmart stores, yet it houses 22 of Walmart's corporate subsidiaries and $64 billion in Walmart assets. According to a new report, the country is the hub of a sprawling global network of corporate units that have reduced Walmart’s tax burden by billions of dollars over the last several years.
In total, Walmart holds $76 billion in assets abroad, spread out over 78 subsidiaries and 15 countries, according to the nonprofit Americans for Tax Fairness. The union- and foundation-backed group says that its analysis of Walmart's overseas corporate structure is the first of its kind.
The report comes as American lawmakers grapple with how to keep U.S. companies from warehousing their foreign cash abroad. Even as the Obama administration has cracked down on tax avoidance maneuvers, corporations like Apple and Starbucks have expanded their offshore hoard to nearly $2.1 trillion.
Walmart, however, has largely avoided attention over tax avoidance strategies, which the company has left out of its annual filings to the Securities and Exchange Commission.
Using public data in international registries, the report shows how Walmart has exploded its offshore web of entities in the past five years. Twenty of its 22 Luxembourg shell companies did not exist before 2009. Since 2011, the retailer has moved $45 billion in assets to country, which has been investigated for granting sweetheart tax deals to foreign corporations.
The report also sheds light on the intricacies of Walmart’s international retail empire. Many of Walmart's foreign locations -- including 3,500 stores in Central America, Japan, China and elsewhere -- are controlled by companies domiciled in separate tax havens, the report says. The details of the report, though eyebrow-raising, do not rise to the level of illegatlity.
Tricky financial engineering allows Walmart to move profits around with a light tax burden. In a maneuver known as "earnings stripping," corporate subsidiaries take out loans from the parent company and pay the interest back at minimal tax rates -- just 0.055 percent in Luxembourg, for instance.
The international community has started to pay more attention to tax havens in recent years, crying foul on some of the same strategies outlined in the report. Most recently, an international commission outlined a raft of reforms that would treat corporations as single entities and bring transparency to international tax policies.
“Walmart is another example of a multinational corporation engaging in deceptive tax practices,” said former U.S. Sen. Carl Levin (D-Mich.) in a release accompanying the report. In 2013, Levin presided over a congressional panel that investigated Apple’s dizzying complex of corporate subsidiaries.
“Multinationals should be required to provide publicly-available, country-by-country reports on their revenues and tax payments,” Levin continued, saying the disclosures would “help stop profitable multinationals from engaging in offshore tax schemes to avoid paying [taxes].”
UPDATE: Walmart representative Randy Hargrove reached out to International Business Times with the following comment regarding the Americans for Tax Fairness study: "This is the 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."
The statement also highlighted Walmart's 32% effective income tax over the past three years and noted that the company did list subsidiaries on its annual filings: "We disclose the significant subsidiaries of the corporation in the company’s 10K, which is compliant with SEC regulations."
The company's most recent 10-K, however, failed to list intermediate subsidiaries in Luxembourg, the British Virgin Islands, the Cayman Islands, Panama, Barbados, Curacao, Ireland, the Netherlands, Cyprus, Gibraltar, Switzerland, Hong Kong, Singapore or Mauritius, which together house 77 separate Walmart subsidiaries, according to the report. Walmart's statement did not deny the existence of these subsidiaries.