Oregon can crack down on tax avoidance by large, multinational corporations by enacting a policy known as worldwide combined reporting, a change that would yield more than $100 million a year in corporate tax collections for the state, according to a new report by the Institute on Taxation and Economic Policy (ITEP).
“One of the ways big corporations avoid paying their fair share in taxes is by artificially shifting their profits overseas, reducing funding for our schools, health care, and other essential services,” said Daniel Hauser, Deputy Director of the Oregon Center for Public Policy. “Worldwide combined reporting requires corporations to come clean about all of their profits taxable in Oregon.”
Offshore tax avoidance involves shifting profits from the place they were earned to a place that levies little or no taxes on corporate income, said Hauser. He explained that because this strategy requires having subsidiaries in different jurisdictions, it is only large, multinational corporations that employ it.
Under current law, Oregon taxes a corporation’s share of U.S. profits attributed to Oregon, even if those profits have been reduced by the corporation’s artificial shifting of profits abroad.
Worldwide combined reporting takes away the tax savings from shifting corporate income offshore, according to the ITEP report. It does so by treating a corporation and all its subsidiaries, in the U.S. and abroad, as one entity for tax purposes.
Under worldwide combined reporting, Oregon would get to tax the share of a multinational corporation’s global profits equal to the share of that corporation’s sales in the state. For example, said Hauser, if Oregon accounted for 5 percent of a multinational corporation’s global sales, Oregon would tax 5 percent of the company’s global profits.
If worldwide combined reporting were the law in Oregon right now, the state would collect about $116 million more in corporate income taxes in 2025, the study said. If all states adopted the law, it would boost state corporate income tax revenues nationally by about $18.7 billion a year.
Worldwide combined reporting is not a new idea. It used to be the way Oregon and other states taxed corporations until 1984, when a coordinated push by multinational corporations pressured states to rescind the policy, Hauser said.
Today, a number of states — Oregon included — are discussing reinstating the policy. In the past couple of years, legislative chambers in Maryland and Minnesota approved the policy, though the efforts died in the other chamber. In the current Oregon legislative session, Senate Bill 419 aims to adopt worldwide combined reporting.
“Any lawmaker who is sick and tired of U.S. companies pretending they earn the bulk of their profits in Ireland and the Cayman Islands should be taking a hard look at worldwide combined reporting right now,” said Carl Davis, Research Director at ITEP and one of the authors of the report.
Read the ITEP report A Revenue Analysis of Worldwide Combined Reporting in the States.
