A New York Times review of securities filings from nearly 500 companies showed that they avoided at least $40 billion in taxes by attributing hundreds of billions of dollars in earnings to low- or no-tax foreign jurisdictions such as Malta, Cyprus, Bermuda, Switzerland, and the Cayman Islands. Amphora Media contributed to the research.

The investigation, which focuses on the impact of the Trump administration’s decision to withdraw from a global effort to curb offshore tax avoidance by multinational companies. Offshore tax strategies don’t necessarily break any laws in the US, but experts who spoke to the NYT said it had gone too far.

“A favourite destination was the tiny Mediterranean island of Malta, where Abbott Laboratories, the pharmaceutical giant, has claimed all its global profits were earned by a subsidiary with no employees. Malta helped the company cut its tax bill by $336 million last year, the filings show,” the NYT article reads.

“Abbott made Malta the final destination of a cat-and-mouse game to stay one step ahead of tax authorities. In 2023, the drugmaker created a subsidiary in Bermuda, which had no corporate income tax. But Bermuda enacted one to comply with the O.E.C.D., which was scheduled to take effect in January 2025.”

“On Dec. 19, 2024, 13 days before the new Bermuda law kicked in, Abbott shifted the tax residency of the subsidiary to Malta, filings show. In 2024, the Abbott unit reported $17 billion in net income — more than its total global profit — and no income taxes anywhere.” 

“Malta helped Abbott cut its tax bill by nearly 20 per cent last year, filings show. The documents also disclose the number of employees at the Malta entity: zero. “

The US Internal Revenue Service is now challenging more than $1 billion of Abbott’s savings, U.S. Tax Court filings show. As part of that dispute, the agency contends that a transaction generating $8 billion of deductions to shield profit from the U.S. minimum offshore tax was abusive and lacked economic substance.

Abbott is far from alone in choosing Malta. According to the NYT, Thermo Fisher Scientific, the scientific equipment maker, used the island to cut its taxes by $3.5 billion last year

S&P Global, the ratings company, trimmed its bill by $269 million through Maltese subsidiaries. Yum Brands, owner of KFC, Pizza Hut and Taco Bell, saved $121 million. Crocs, the shoemaker, saved $47 million by using Malta, where the company has no offices.

The International Tax Observatory, a research group at the Paris School of Economics, says profits allocated by U.S. companies to Malta soared to $5.6 billion in 2022 from $134 million in 2017.

In 2021, the Biden administration said it would join an effort coordinated by the Organisation for Economic Cooperation and Development to impose a minimum corporate income tax of 15 per cent. 

That levy applies on a country-by-country basis, avoiding the blending loophole and reducing the incentive to shift income into tax havens. Dozens of nations signed on, including most European Union members, Japan, Britain and Australia.

In 2022, the European Union issued a directive permitting a handful of countries, including Malta, to delay carrying out the 15 per cent minimum tax. That tax in Malta will not kick in until the end of 2029.