Sen. Ron Johnson (R-Wis.) denied Monday that an investment in an Irish company is a tax avoidance scheme, in response to a Huffington Post report that the company had many features of a tax shelter.
Johnson maintained that the Irish company, DP Lenticular, is merely a distributor of products made by Pacur, the Wisconsin-based plastics manufacturer he helped found. The Wisconsin senator told the Journal Sentinel he invested in DP Lenticular to get its financial information.
The Journal Sentinel’s Daniel Bice was among a group of reporters who followed Johnson out of a campaign event Monday to get answers about the investment.
Initially reluctant to speak about it, Johnson finally spoke with the scrum of reporters once he got outside. A local TV news station caught the exchange on camera.
“This is how you export product,” Johnson told the reporters. “Without a sales agency, I don’t know how you sell product.”
“There’s no profit parked over there or anything else,” he added, according to the Journal Sentinel. “Those profits are paid out every year, and I report them and I pay taxes on them.”
Johnson’s campaign declined to comment for HuffPost’s story about the investment on Friday.
The senator’s response Monday was nearly identical to the one he gave when a reporter asked him about the investment after a debate with challenger Russ Feingold at Marquette University Law School in October.
Johnson did not explain, however, why the multimillion-dollar company supposedly charged with distribution of Pacur’s products throughout Europe only employs one person. DP Lenticular is also owned by a Spanish company, Dodecinvest SL, that reported no employees or revenue and paid no corporate taxes in the most recent year its data is available.
Tax experts told HuffPost that the one-employee structure of the company, and ownership by another, similarly empty company, suggests it is a mechanism for funneling profits to low-tax Ireland or elsewhere.
In addition, Johnson owns 9.9 percent of DP Lenticular ― just below the threshold that would require him to report it to the Internal Revenue Service. Johnson told the Journal Sentinel that the decision not to buy more of the company in 2007 was indeed meant to “minimize the impact of government regulations,” something he said was “just smart business.”
Johnson subsequently had to disclose the investment as a United States senator.
Ireland is a top destination for tax dodging due to its corporate tax rate of 12.5 percent ― which is lower than the official top U.S. rate and that of many other developed nations ― and other rules making it easy to transfer money to countries, like Bermuda, with even lower taxes. Even if Johnson had legitimate business reasons for investing in the company, he stood to benefit from Ireland’s favorable tax laws.
Johnson has opposed measures that would toughen enforcement on corporate tax avoidance overseas, claiming instead that the solution is to lower domestic tax rates for U.S.-based corporations.
Feingold and the Wisconsin Democratic Party have attacked Johnson for the investment, claiming it is evidence of tax avoidance that resembles the antics of GOP presidential nominee Donald Trump.
“It’s not that Sen. Johnson doesn’t understand the issues facing middle-class and working families,” Michael Tyler, spokesman for Feingold, told the Journal Sentinel in a statement. “It’s that, just like Donald Trump, his own interests come first.”
Feingold, who lost his Senate seat to Johnson in 2010, currently leads Johnson in the polls by about 6 percentage points, according to HuffPost Pollster’s polling average.
UPDATE: 11/3 ― Brian Reisinger, a spokesman for Johnson’s campaign, insisted that there are “no earnings outside dividends.”
“No income attributable to Ron is retained in DP Lenticular in Ireland or Europe,” Reisinger said in an email. He also denied that Johnson’s investment in DP Lenticular is designed to avoid U.S. taxes.
“The purpose of Ron’s investment in DP Lenticular is to create a partnership that allows PACUR to export more products overseas,” he said. “The only income Ron makes, about $15,000, is subject to both state and federal income tax, and Ron paid them.”
Reisinger also described Johnson’s proposals for corporate tax reform in greater detail. “Ron supports scrapping the tax code and enacting pro-growth tax reform, and reducing burdensome regulations ― all to remove unfair government policies and help create jobs here at home,” he said.