BURBANK, California — When Walt Disney and his brother Roy opened their small business, The Disney Brothers Studio, in 1923, they were probably unaware of the heights it would reach in the future. Starting out in an office rented for $10 per month, the brothers’ company moved to the current headquarters in Burbank, California less than 15 years later. The Walt Disney Company has since mushroomed into one of the most profitable businesses in the United States.
Last year reported revenues topped $42.25 billion, the third record-setting year for the company.
Like many large businesses in the United States, Disney keeps a sizeable amount of its money in offshore holdings. There are generally two reasons for doing this: to avoid U.S. taxes or to invest internationally. Disney claims the latter, stating their foreign business investments and ventures are expanding. Such projects include Shanghai Disneyland construction costing $4.4 billion, launching a Disney Channel in Russia for $300 million and renovating a Disney cruise ship in Spain for a currently unknown cost.
Regardless of the reason behind the company’s offshore holdings, the outcomes of such financial activities are immensely profitable. Disney pays taxes to the various countries housing their foreign investments but those average out to only 14% compared to the 35% that would be taken out of profits in the U.S. The savings in taxes add up to $315 million.
While Disney accumulates $315 million in tax savings with help from its foreign investments in the Cayman Islands, a small country 435 miles southwest of the islands wallows in poverty: Honduras.
Honduras is one of the least developed countries in Central and Latin America, suffering many setbacks such as brutal military rule, widespread gangs and the destruction caused by Hurricane Mitch, which left $3 billion in damages and 5,000 people dead.
Honduras’ population is about 8 million, and according to the World Bank an estimated 62% live below the national poverty line. Meaning, there are nearly 5 million people living on less than 2 US dollars a day. Since about half of the population is under the age of 19, it is estimated that at least 2 million children are living in poverty — many of which are undernourished or malnourished.
Honduras was the first country to sign a Millennium Challenge Account (MCA) Compact with the U.S. in 2005. Through the initiative, $205 million was invested over five years “to improve its road infrastructure, diversify its agriculture and transport its products to market,” according to the U.S. State Department. The transportation aspect is particularly helpful because many rural Hondurans lack reliable access to markets, schools or health centers.
Disney’s tax savings could more than double the MCA’s budget. For the children and adults suffering from lack of nutrition, $315 million would be transformative.
Each of the 5 million individuals would be able to receive over $60 million, and if all 8 million citizens were included they would receive over $39 million. When taken into consideration that amounts to an approximately 5 million surviving on less than $2 per day, each would receive at least 30,000,000 times that. With $165,000 per day for one year, Hondurans could not only improve their nutrition but it could also transform their country and economy.
Directing the money through official channels is another option. Children International sponsors over 20,000 youth through health care, community centers, anti-parasite treatments and educational support.
The $315 million could also be invested in microfinance. The organization CARE began establishing Village Savings and Loan Associations (VSLA) in Africa in 1991 and has since expanded the program across the globe. CARE trains members on money management, group dynamics, and governance. Those members in turn can establish or train other VSLAs. The per-person cost to set up a VSLA is $50. Those individuals typically gain 40% back on their investments each year.
Disney’s savings could sponsor all 5 million impoverished Hondurans with enough left over to give each person $13 dollars to invest. Though this may not seem like much, it is safe to assume the number would be at least doubled — although, this number would not calculate youth in the equation.
All in all, tax savings from The Walt Disney Company holds a great amount of potential to fund an entire country’s economic boom. Given its annual net income of $6.1 billion, Disney rarely saves much money by keeping offshore subsidiaries. The scope of Disney’s wealth could go to great lengths in aiding the impoverished citizens in regions that could urgently benefit from aid and global funds such as Honduras.
– Katey Baker-Smith