MADISON, Wis. (AP) — Wisconsin Republican Sen. Ron Johnson on Monday defended his investment in an Irish company that distributes products made by the plastic manufacturer he used to own before being elected to the U.S. Senate in 2010.
Johnson, who is in a tight re-election fight with Democratic former Sen. Russ Feingold, denied in comments to the Milwaukee Journal Sentinel that he was using his investment in the Irish company as a way to dodge paying U.S. taxes. Ireland could be used to keep the company's European profits out of the reach of American taxation.
Johnson, who is in a race that could determine whether Democrats retake control of the Senate, calls the investment a smart business move to get specialized plastic sheets made by the company he used to own, Pacur Inc., into Europe.
"This is actually how you export product, OK?" Johnson told the Journal Sentinel. "You have sales agencies. ... I have small investment, primarily, so I can see the financial information of that."
Feingold campaign spokesman Michael Tyler told The Associated Press that the issue "cuts to the heart of Sen. Johnson gaming the system for billionaires and multimillionaires like himself."
Johnson owns 9.9 percent of Dublin-based DP Lenticular, which advertises itself as the European distributor for Pacur's specialized plastic products. His brother Barry, who now runs Pacur, is listed as a director for the Irish firm. The company has a single employee and is controlled by a Spanish holding company that doesn't pay taxes.
Johnson, who made the investment in 2007, said he earns dividends of about $15,000 a year but pays all U.S. taxes on them. He told the Journal Sentinel that he doesn't receive any other income from the firm and Pacur has not diverted profits or other income to the Irish firm.
Daniel Pierret, owner of Dodecinvest SL, the holding company that owns DP Lenticular, corroborated that arrangement in a letter provided to the AP by Johnson's campaign.
"I established DP Lenticular, a sales agency, in September 2001 to facilitate importation of products from the United States," Pierret wrote. "Every year, DP Lenticular distributes Ron's dividends, and repatriates those earnings back to the United States."
Johnson also said he structured his investment just below 10 percent to avoid reporting requirements to the Internal Revenue Service that kick in at that point. The Huffington Post on Friday first reported on his investment, which Johnson had to disclose when elected to the Senate in 2010.
Ireland's tax laws have been in the spotlight as large U.S.-based corporations, including Apple and Google, have set up shell companies there to avoid paying taxes. Johnson has blamed corporate tax dodging — one form of which is sometimes referred to as corporate inversions — on a U.S. tax code that isn't competitive.
Ordinary corporate earnings are taxed at just 12.5 percent in Ireland and the country does not tax dividends earned by U.S. investors as they are leaving the country, as is commonly done in other countries.
Not enough is known about what Johnson did to draw conclusions about whether he was dodging taxes, said Stephen Shay, a senior lecturer on law with a specialty on international taxation at Harvard Law School.
"On the face of it, there is evident tax planning but not an apparent a clear tax issue," Shay told the AP. "The whole question is what's not on the face of it. ... We don't have the whole picture."
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