Group 1 - The concept of tax havens is not limited to the ultra-wealthy, as individuals are also utilizing these methods to minimize taxes legally [1][2] - Estimates suggest that individuals are hiding between $8.7 trillion and $36 trillion in tax havens, highlighting the widespread nature of this practice [2] - The accessibility of tax shelters is increasing, making it easier for a broader range of individuals to take advantage of these opportunities [2] Group 2 - Municipal bonds provide tax advantages, being mostly exempt from federal income taxes and often from state and local taxes, with implied yields over 7% after accounting for tax benefits [3][4] - Retirement funds such as 401(k)s and IRAs serve as tax shelters by reducing taxable income and deferring tax payments until retirement, with contribution limits set at $24,500 for 401(k)s and $7,500 for IRAs in 2026 [4] - Whole life insurance offers multiple tax benefits, including tax-deferred growth of cash value and tax-free withdrawals up to the basis, along with tax-free death benefits for beneficiaries [4][5]

Core Insights - A report indicates that Starbucks Coffee Trading Company (SCTC), a subsidiary in Switzerland, has significantly influenced Starbucks' tax payments over the past decade, helping to shift approximately $1.3 billion in profits to lower-tax jurisdictions since 2015 [2][10] - The report highlights a contrast between Starbucks' public image of social responsibility and its use of tax strategies that exploit loopholes [3][10] Tax Strategy and Financial Practices - SCTC is responsible for sourcing unroasted coffee and has been used to book the costs of these beans, which do not physically pass through Switzerland, allowing Starbucks to mark up prices significantly [4][5] - The markup on coffee beans increased from about 3% between 2005 and 2010 to 18% between 2011 and 2014, contributing to the profit shift [4] - The average tax rate for US companies in Switzerland is reported to be 3.9%, compared to the US corporate tax rate of 21%, indicating a substantial tax advantage [6] Dividends and Profit Allocation - SCTC has reportedly paid between $125 million and $150 million in dividends annually to another subsidiary, Starbucks Coffee EMEA B.V., with these payments not being taxed upon leaving Switzerland or entering the Netherlands [7] - The report analyzed financial filings of Starbucks subsidiaries across Europe to trace profits booked at SCTC [7] Company Response and Industry Context - Starbucks responded to the report by asserting that it pays appropriate taxes in all jurisdictions and that the report misrepresents its business model [8] - The use of offshore tax strategies is not unique to Starbucks, as many large companies utilize tax havens to minimize tax obligations, a practice that has been ongoing for decades [11][12]