Wal-Mart Reported To Use Havens To Dodge Billions In Taxes

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How Wal-Mart Secretly Uses Tax Havens To Dodge Taxes by Americans For Tax Fairness

First a statement from Wal-Mart


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.

Walmart paid $6.2 billion in U.S. federal corporate income tax last year, nearly 2% of all corporate income tax collected by the U.S. Treasury. Walmart also pays over $10 billion in payroll taxes for its 1.3 million U.S. associates. In addition, Walmart paid $3.3 billion in property tax, state income tax, franchise tax and other state taxes.  Walmart also collected and remitted over $14 billion in state and local sales taxes  – helping  fund education, public safety, and infrastructure improvements in the communities where we operate.  Walmart has processes in place to comply with applicable SEC and IRS rules, as well as the tax laws of each country where we operate and we maintain transparency with the IRS via real-time disclosure of our business transactions and corporate structure.

The report insinuates that the company would benefit from a “deemed repatriation” proposal under consideration by some in Washington.  In fact, because much of the company’s unremitted earnings overseas have been invested into physical assets like stores, distribution centers and equipment in other markets around the world, the company would be unlikely to benefit from such a proposal.  More likely, it would represent a tax increase as the company would have tax due without the benefit of repatriating funds to the U.S. due to our investments in physical assets that are not liquid.


Just as the company uses funds generated from the U.S. market to continue to invest in stores, wages and growth in the US, we keep a large portion of foreign earnings in international markets where they are reinvested for growth.  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 percent of Walmart’s revenue, Walmart had an effective tax rate of approximately 32 percent over the past three years.


One point the report makes is around the listing of our subsidiaries.  We disclose the significant subsidiaries of the corporation in the company’s 10K, which is compliant with SEC regulations.


Most people know that Wal-Mart is the world’s largest corporation. Virtually no one knows that Wal-Mart has an extensive and secretive web of subsidiaries located in countries widely known as tax havens. Typically, the primary purpose for a corporation to set up subsidiaries in tax havens where it has little to no business operations and few, if any, employees is to pay little, if any, taxes and to maintain financial secrecy.

This report reveals that Wal-Mart has placed at least $76 billion worth of assets in 78 subsidiaries located in 15 tax havens in which it has no retail stores (Figure 1). This is the first-ever public documentation of Wal-Mart’s subsidiaries in tax havens (“tax-haven subsidiaries”). That’s because Wal-Mart has never openly reported their existence in the U.S. Securities and Exchange Commission (SEC) filings where subsidiaries are normally disclosed. Instead, Wal-Mart has kept these tax-haven subsidiaries secretive by burying mention of their existence deep inside of SEC filings and financial documents filed by Wal-Mart subsidiaries all around the world, only some of which are available to the public. Moreover, Wal-Mart gives many of its tax-haven subsidiaries obscure names like “Azure Holdings” or “MCLM III,” which turns the simple task of identifying them into a major investigative effort.

Although Wal-Mart’s business practices have a profound impact on every corner of the global economy, the company keeps this most basic information about itself effectively hidden from public view. Compiling the data for this report required hundreds of hours of labor to discover these subsidiaries and unearth financial records from Washington to Switzerland, London to Luxembourg, and South Africa to Central America. More research is needed to fully assess the extent of Wal-Mart’s web of tax-haven subsidiaries and how Wal-Mart may use it to avoid paying taxes now and in the future.

Wal-Mart’s entrance into the world of tax havens is especially notable because the retail industry has not been known for this kind of activity. Rather, the big corporate players in the tax-haven game have historically been high-tech firms, pharmaceutical companies and Wall Street banks. They are able to shift profits offshore relatively easily through a variety of means – chief among them transferring ownership of intellectual property to tax-haven subsidiaries. This kind of profit shifting is difficult for retailers to accomplish because their business activities and earnings are so clearly tied to retail operations in particular countries. The discovery that Wal-Mart has built an extensive web of tax-haven subsidiaries suggests that a range of exotic international tax avoidance strategies are being adapted in new sectors of the economy.

Wal-Mart Reported To Use Havens To Dodge Billions In Taxes

The greatest challenge in preparing this report has been determining the impact that these tax-haven subsidiaries have on how much Wal-Mart may avoid in taxes here at home and across the globe. The large physical footprint of the retail sector makes it impossible for Wal-Mart to achieve the level of tax avoidance, on a percentage basis, that is available to other companies in the high-tech, pharmaceutical and banking sectors.

However, given Wal-Mart’s enormous size and characteristically thin profit margins for a retailer (about $16 billion in profits on $486 billion in revenues), even a relatively modest amount of tax avoidance can have a major positive impact on the company’s bottom line. This, in turn, can provide Wal-Mart with significant competitive advantages against smaller and more domestically-oriented retailers.

It appears that Wal-Mart’s tax haven activities have expanded significantly over the last five years. Unfortunately, it is impossible to determine from publicly available financial statements the extent to which this tax-haven expansion has already affected the company’s bottom line – and reduced the tax revenues of governments around the world. In the absence of reforms to the international tax system, including the stricter disclosure requirements proposed in this report, the scope and scale of Wal-Mart’s tax avoidance will continue to evade precise calculation.

Key Findings

Wal-Mart has established a vast and relatively new web of subsidiaries in tax havens, while avoiding public disclosure of these subsidiaries.

  • Wal-Mart has established at least 78 subsidiaries and branches in 15 overseas tax havens (for purposes of this report, Spain is considered a tax haven because of the way that Wal-Mart used its subsidiary there to avoid taxes in Argentina).
  • Wal-Mart’s subsidiaries in tax havens have remained largely invisible to even the most knowledgeable experts on corporate tax avoidance. This is partly due to the fact that Wal-Mart has never listed any of them on Exhibit 21 (“Subsidiaries”) of the company’s annual 10-K filing with the SEC.
  • There is a legal requirement to list subsidiaries that account for greater than 10 percent of assets or income, which Wal-Mart may be skirting. Wal-Mart appears to have some subsidiaries that meet the 10 percent disclosure threshold by virtue of their ownership of lower-tier Wal-Mart operating companies or other assets. Nonetheless, Wal-Mart only discloses six foreign subsidiaries, all of which are domiciled in countries where it has retail operations.

Wal-Mart Subsidiaries in tax havens

See full PDF below.

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The post above is drafted by the collaboration of the Hedge Fund Alpha Team.

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