Thursday, February 17, 2011 1:59:30 AM
arizona, et al, good one .. YOU know this, while others defend the situation ..
What the Top U.S. Companies Pay in Taxes
by Christopher Helman
Friday, April 2, 2010Forbes
As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest,
most profitable corporations enjoy a far lower tax rate than you do -- that is, if they pay taxes at all.
More from Forbes.com:
• In Pictures: What the 25 Top U.S. Companies Pay in Taxes
• Apple America's Highest Sales Taxes
• 12 Dodgy Tax Preparers
The most egregious example is General Electric (NYSE: GE - News). Last year the conglomerate generated $10.3
billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.
Avoiding taxes is nothing new for General Electric. In 2008 its effective
tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%.
How did this happen? It's complicated. GE's tax return is the largest the IRS deals with each year -- some 24,000 pages
if printed out. Its annual report filed with the Securities and Exchange Commission weighs in at more than 700 pages.
Inside you'll find that GE in effect consists of two divisions: General Electric Capital and everything else. The everything
else -- maker of engines, power plants, TV shows and the like -- would have paid a 22% tax rate if it was a standalone company.
It's GE Capital that keeps the overall tax bill so low. Over the last two years, GE Capital has displayed an uncanny ability to lose lots of money in the U.S. (posting a $6.5 billion loss in 2009), and make lots of money overseas (a $4.3 billion gain). Not only do the U.S. losses balance out the overseas gains, but GE can defer taxes on that overseas income indefinitely. The timing of big deductions for depreciation in GE Capital's equipment leasing business also provides a tax benefit, as will loan losses left over from the credit crunch.
But it's the tax benefit of overseas operations that is the biggest reason why multinationals end up with lower tax rates than the rest of us. It only makes sense that multinationals "put costs in high-tax countries and profits in low-tax countries," says Scott Hodge, president of the Tax Foundation. Those low-tax countries are almost anywhere but the U.S. "When you add in state taxes, the U.S. has the highest tax burden among industrialized countries," says Hodge. In contrast, China's rate is just 25%; Ireland's is 12.5%.
Corporations are getting smarter, not just about doing more business in low-tax countries, but in moving their more valuable assets there as well. That means setting up overseas subsidiaries, then transferring to them ownership of long-lived, often intangible but highly profitable assets, like patents and software.
As a result, figures tax economist Martin Sullivan, companies are keeping some $28 billion a year out of the clutches of the U.S. Treasury by engaging in so-called transfer pricing arrangements, where, say, Microsoft's (NYSE: MSFT - News) overseas subsidiaries license software to its U.S. parent company in return for handsome royalties (that get taxed at those lower overseas rates).
"Corporations are paying lower amounts of their profits in taxes now than in the past," says Douglas Schackelford, who teaches tax law at the University of North Carolina at Chapel Hill. "Other countries have been lowering their rates, but not the U.S."
Mind you, not all global megacorps enjoy such low tax rates. Try to muster some pity for Big Oil. ExxonMobil (NYSE: XOM - News) paid more income taxes than any other U.S. company last year, some $15 billion, or 47% of pretax earnings. Exxon's peers Chevron (NYSE: CVX - News) and ConocoPhillips (NYSE: COP - News) likewise paid out more than half their earnings in income taxes. The oil companies are oddities among the multinationals because many of the oil-rich countries where they do business levy even higher taxes than the U.S.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Insert: some ??? on the above ..
On paper, the five big companies operating in the U.S. have an effective tax rate of around 40%, said Anne Mathias, director of research at MF Global's Washington Research Group.
That's considerably higher than the U.S. average of 28%, and would mean a company like Exxon Mobil has a higher tax rate than 90% of U.S. corporations.
But Mathias said what they actually pay tends to be lower than what they report as their "effective tax rate."
She said companies can use various accounting techniques to mask their true tax bill, including adding a lot of expenses to their U.S. income statement, chalking up more royalty payments as income taxes, or keeping profits offshore.
These moves make their true tax bill an open question. Some analysts said they bring it substantially
lower than 40%, other said they barely moved the needle.?Yes, 80% of our electricity can be 'clean' by 2035
http://news.findtarget.com/business/fighting_over_big_oils_4_billion_a_year_windfall/
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. No wonder that of $15 billion in income taxes last year, Exxon paid none of it to Uncle Sam, and has tens of billions in earnings permanently reinvested overseas.
Likewise, GE has $84 billion in overseas income parked indefinitely outside the U.S.
Naturally the Obama administration wants to put an end to this. It has proposed doing away with tax deferrals on overseas income. If the plan passes, a U.S. company that pays a 25% tax on profits in China would have to pay an additional 10% income tax to Uncle Sam to bring it up to the 35% corporate rate. "Eliminating deferrals would put U.S. companies on an unlevel playing field," says the Tax Foundation's Hodge, "especially if competing with the likes of Germany, which only taxes companies on domestic operations."
Hewlett-Packard (NYSE: HPQ - News) and others among the top 25 state in their annual reports that if Obama's tax measures pass it would mean a certain tax hike, probably amounting to billions of dollars.
Would no more tax holiday for GE really end up helping Mr. and Mrs. Taxpayer? Doubtful. "The average Joe should be in favor of lower corporate taxes," says Hodge, "because ultimately they are paying the corporate income tax. Either as workers, getting lower wages and fewer jobs, or as consumers, paying higher prices, or as retirees, getting lower dividends and earnings on their investments."
In the same vein, JPMorgan Chase (NYSE: JPM - News) Chief Executive Jamie Dimon has spoken out
against an Obama proposal to levy a special tax on banks to recoup bailout costs. "Using tax policy to
punish people is a bad idea," said Dimon. "All businesses tend to pass costs on to customers."
No. 1: Wal-Mart Stores
Robyn Beck/AFP/Getty Images
Sales: $401 billion
Pretax income: $20.9 billion
Income taxes: $7.1 billion
Tax rate: 34.2%
$1.2 billion of Wal-Mart Stores' taxes are international.
No. 2: ExxonMobil
Eric Thayer/Getty Images
Sales: $311 billion
Pretax income: $35 billion
Income taxes: $15 billion
Tax rate: 47%
None of ExxonMobil's income taxes were paid in the U.S. In 2008 the company's income tax bill was $36 billion.
No. 3: Chevron
David McNew/Getty Images
Sales: $172 billion
Pretax income: $18.5 billion
Income taxes: $8 billion
Tax rate: 43%
Chevron paid $19 billion income tax in 2008. Of this year's taxes, just $200 million were paid in the U.S.
No. 4: General Electric
AP Photo/Paul Sakuma
Sales: $157 billion
Pretax income: $10.3 billion
Income taxes: (-$1.1 billion)
Tax rate: N/A
How Can It Be That You Pay More to the IRS Than General Electric?
GE's financial services unit, GE Capital, keeps the overall tax bill so low. Over the last two years, GE Capital has displayed
an uncanny ability to lose lots of money in the U.S. and make lots of money overseas, where tax rates are lower.
No. 5: ConocoPhillips
http://l.yimg.com/a/p/fi/28/51/43.jpg
AP Photo/David Zalubowski
Sales: $152 billion
Pretax income: $10 billion
Income taxes: $5 billion
Tax rate: 51%
ConocoPhillips paid $13 billion in taxes in 2008.
No. 6: AT&T
Justin Sullivan/Getty Images
Sales: $123 billion
Pretax income: $19 billion
Income taxes: $6.2 billion
Tax rate: 32.4%
AT&T's executive officers are eligible to bill the company
$14,000 a year for their own income tax preparations.
No. 7: Bank of America
David McNew/Getty Images
Sales: $120 billion
Pretax income: $4.4 billion
Income taxes: (-$1.9 billion)
Tax rate: N/A
How did Bank of America not pay any taxes on $4.4 billion in income? Because of deductions like $860 million in tax-
exempt income, $670 million in low-income housing credits and a $600 million loss on shares of foreign subsidiaries.
With a provision for credit losses of $49 billion, Bank of America probably won't be paying taxes for a long time.
No. 8: Ford Motor
Scott Olson/Getty Images
Sales: $118 billion
Pretax income: $3 billion
Income taxes: $69 million
Tax rate: 2.3%
Ford's tax rate is so low because of past years' losses from U.S. operations.
No. 9: Hewlett-Packard
Justin Sullivan/Getty Images
Sales: $115 billion
Pretax income: $9.4 billion
Income taxes: $1.75 billion
Tax rate: 18.6%
HP's low tax rate is due to lower tax rates in foreign countries. The company says in its annual report that
President Obama's proposals to end tax deferrals on international operations would mean a big tax hike.
No. 10: Berkshire Hathaway
Berkshire.jpg
Justin Sullivan/Getty Images
Sales: $112 billion
Pretax income: $11.5 billion
Income taxes: $3.5 billion
Tax rate: 30%
Click here to see more of What The 25 Top U.S. Companies Pay In Taxes.
There are no comments yet
http://finance.yahoo.com/taxes/article/109244/what-the-top-us-companies-pay-in-taxes
What the Top U.S. Companies Pay in Taxes
by Christopher Helman
Friday, April 2, 2010Forbes
As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest,
most profitable corporations enjoy a far lower tax rate than you do -- that is, if they pay taxes at all.
More from Forbes.com:
• In Pictures: What the 25 Top U.S. Companies Pay in Taxes
• Apple America's Highest Sales Taxes
• 12 Dodgy Tax Preparers
The most egregious example is General Electric (NYSE: GE - News). Last year the conglomerate generated $10.3
billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.
Avoiding taxes is nothing new for General Electric. In 2008 its effective
tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%.
How did this happen? It's complicated. GE's tax return is the largest the IRS deals with each year -- some 24,000 pages
if printed out. Its annual report filed with the Securities and Exchange Commission weighs in at more than 700 pages.
Inside you'll find that GE in effect consists of two divisions: General Electric Capital and everything else. The everything
else -- maker of engines, power plants, TV shows and the like -- would have paid a 22% tax rate if it was a standalone company.
It's GE Capital that keeps the overall tax bill so low. Over the last two years, GE Capital has displayed an uncanny ability to lose lots of money in the U.S. (posting a $6.5 billion loss in 2009), and make lots of money overseas (a $4.3 billion gain). Not only do the U.S. losses balance out the overseas gains, but GE can defer taxes on that overseas income indefinitely. The timing of big deductions for depreciation in GE Capital's equipment leasing business also provides a tax benefit, as will loan losses left over from the credit crunch.
But it's the tax benefit of overseas operations that is the biggest reason why multinationals end up with lower tax rates than the rest of us. It only makes sense that multinationals "put costs in high-tax countries and profits in low-tax countries," says Scott Hodge, president of the Tax Foundation. Those low-tax countries are almost anywhere but the U.S. "When you add in state taxes, the U.S. has the highest tax burden among industrialized countries," says Hodge. In contrast, China's rate is just 25%; Ireland's is 12.5%.
Corporations are getting smarter, not just about doing more business in low-tax countries, but in moving their more valuable assets there as well. That means setting up overseas subsidiaries, then transferring to them ownership of long-lived, often intangible but highly profitable assets, like patents and software.
As a result, figures tax economist Martin Sullivan, companies are keeping some $28 billion a year out of the clutches of the U.S. Treasury by engaging in so-called transfer pricing arrangements, where, say, Microsoft's (NYSE: MSFT - News) overseas subsidiaries license software to its U.S. parent company in return for handsome royalties (that get taxed at those lower overseas rates).
"Corporations are paying lower amounts of their profits in taxes now than in the past," says Douglas Schackelford, who teaches tax law at the University of North Carolina at Chapel Hill. "Other countries have been lowering their rates, but not the U.S."
Mind you, not all global megacorps enjoy such low tax rates. Try to muster some pity for Big Oil. ExxonMobil (NYSE: XOM - News) paid more income taxes than any other U.S. company last year, some $15 billion, or 47% of pretax earnings. Exxon's peers Chevron (NYSE: CVX - News) and ConocoPhillips (NYSE: COP - News) likewise paid out more than half their earnings in income taxes. The oil companies are oddities among the multinationals because many of the oil-rich countries where they do business levy even higher taxes than the U.S.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Insert: some ??? on the above ..
On paper, the five big companies operating in the U.S. have an effective tax rate of around 40%, said Anne Mathias, director of research at MF Global's Washington Research Group.
That's considerably higher than the U.S. average of 28%, and would mean a company like Exxon Mobil has a higher tax rate than 90% of U.S. corporations.
But Mathias said what they actually pay tends to be lower than what they report as their "effective tax rate."
She said companies can use various accounting techniques to mask their true tax bill, including adding a lot of expenses to their U.S. income statement, chalking up more royalty payments as income taxes, or keeping profits offshore.
These moves make their true tax bill an open question. Some analysts said they bring it substantially
lower than 40%, other said they barely moved the needle.?Yes, 80% of our electricity can be 'clean' by 2035
http://news.findtarget.com/business/fighting_over_big_oils_4_billion_a_year_windfall/
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. No wonder that of $15 billion in income taxes last year, Exxon paid none of it to Uncle Sam, and has tens of billions in earnings permanently reinvested overseas.
Likewise, GE has $84 billion in overseas income parked indefinitely outside the U.S.
Naturally the Obama administration wants to put an end to this. It has proposed doing away with tax deferrals on overseas income. If the plan passes, a U.S. company that pays a 25% tax on profits in China would have to pay an additional 10% income tax to Uncle Sam to bring it up to the 35% corporate rate. "Eliminating deferrals would put U.S. companies on an unlevel playing field," says the Tax Foundation's Hodge, "especially if competing with the likes of Germany, which only taxes companies on domestic operations."
Hewlett-Packard (NYSE: HPQ - News) and others among the top 25 state in their annual reports that if Obama's tax measures pass it would mean a certain tax hike, probably amounting to billions of dollars.
Would no more tax holiday for GE really end up helping Mr. and Mrs. Taxpayer? Doubtful. "The average Joe should be in favor of lower corporate taxes," says Hodge, "because ultimately they are paying the corporate income tax. Either as workers, getting lower wages and fewer jobs, or as consumers, paying higher prices, or as retirees, getting lower dividends and earnings on their investments."
In the same vein, JPMorgan Chase (NYSE: JPM - News) Chief Executive Jamie Dimon has spoken out
against an Obama proposal to levy a special tax on banks to recoup bailout costs. "Using tax policy to
punish people is a bad idea," said Dimon. "All businesses tend to pass costs on to customers."
No. 1: Wal-Mart Stores
Robyn Beck/AFP/Getty Images
Sales: $401 billion
Pretax income: $20.9 billion
Income taxes: $7.1 billion
Tax rate: 34.2%
$1.2 billion of Wal-Mart Stores' taxes are international.
No. 2: ExxonMobil
Eric Thayer/Getty Images
Sales: $311 billion
Pretax income: $35 billion
Income taxes: $15 billion
Tax rate: 47%
None of ExxonMobil's income taxes were paid in the U.S. In 2008 the company's income tax bill was $36 billion.
No. 3: Chevron
David McNew/Getty Images
Sales: $172 billion
Pretax income: $18.5 billion
Income taxes: $8 billion
Tax rate: 43%
Chevron paid $19 billion income tax in 2008. Of this year's taxes, just $200 million were paid in the U.S.
No. 4: General Electric
AP Photo/Paul Sakuma
Sales: $157 billion
Pretax income: $10.3 billion
Income taxes: (-$1.1 billion)
Tax rate: N/A
How Can It Be That You Pay More to the IRS Than General Electric?
GE's financial services unit, GE Capital, keeps the overall tax bill so low. Over the last two years, GE Capital has displayed
an uncanny ability to lose lots of money in the U.S. and make lots of money overseas, where tax rates are lower.
No. 5: ConocoPhillips
http://l.yimg.com/a/p/fi/28/51/43.jpg
AP Photo/David Zalubowski
Sales: $152 billion
Pretax income: $10 billion
Income taxes: $5 billion
Tax rate: 51%
ConocoPhillips paid $13 billion in taxes in 2008.
No. 6: AT&T
Justin Sullivan/Getty Images
Sales: $123 billion
Pretax income: $19 billion
Income taxes: $6.2 billion
Tax rate: 32.4%
AT&T's executive officers are eligible to bill the company
$14,000 a year for their own income tax preparations.
No. 7: Bank of America
David McNew/Getty Images
Sales: $120 billion
Pretax income: $4.4 billion
Income taxes: (-$1.9 billion)
Tax rate: N/A
How did Bank of America not pay any taxes on $4.4 billion in income? Because of deductions like $860 million in tax-
exempt income, $670 million in low-income housing credits and a $600 million loss on shares of foreign subsidiaries.
With a provision for credit losses of $49 billion, Bank of America probably won't be paying taxes for a long time.
No. 8: Ford Motor
Scott Olson/Getty Images
Sales: $118 billion
Pretax income: $3 billion
Income taxes: $69 million
Tax rate: 2.3%
Ford's tax rate is so low because of past years' losses from U.S. operations.
No. 9: Hewlett-Packard
Justin Sullivan/Getty Images
Sales: $115 billion
Pretax income: $9.4 billion
Income taxes: $1.75 billion
Tax rate: 18.6%
HP's low tax rate is due to lower tax rates in foreign countries. The company says in its annual report that
President Obama's proposals to end tax deferrals on international operations would mean a big tax hike.
No. 10: Berkshire Hathaway
Berkshire.jpg
Justin Sullivan/Getty Images
Sales: $112 billion
Pretax income: $11.5 billion
Income taxes: $3.5 billion
Tax rate: 30%
Click here to see more of What The 25 Top U.S. Companies Pay In Taxes.
There are no comments yet
http://finance.yahoo.com/taxes/article/109244/what-the-top-us-companies-pay-in-taxes
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