Corporations Lowering Their Tax Rate More Than 20 Points Due To Offshore Deferral
Corporations Lowering Their Tax Rate More Than 20 Points Due To Offshore Deferral
As we’ve noted before, the business lobby has gone into high gear to defeat the Obama administration’s proposal to stop allowing corporations to defer taxation on profits they make overseas. “This one hits the bottom line of companies more than any other issue right now. We have to defeat it,” said Ralph Hellmann, the lead lobbyist for the Information Technology Industry Council.
With that in mind, it’s worth looking at how corporations use this deferral to avoid paying taxes. And courtesy of the Wall Street Journal, we have the amount by which some corporations lowered their effective tax rate in 2008 thanks to the current law:
| Corporation | Percentage taxes lowered |
| General Electric | 26.9% |
| Pfizer | 20.2% |
| Hewlett-Packard | 16.9% |
| Cisco | 16.1% |
| Coca-Cola | 14.3% |
| Johnson & Johnson | 12.4% |
| Merck and Co. | 11.7% |
Remember, the statutory rate that the right-wing is always up-in-arms about — but which few corporations actually pay — is 35 percent. But General Electric was actually able to lower its effective rate all the way down to 5.5 percent, due to its use of deferrals, tax havens, and other intricacies of the corporate tax code.
According to a report from the U.S. PIRG Education Fund, a $100 billion annual tax burden is shifted to US-based individuals and companies thanks to corporations stowing their profits offshore:
Over ten years, an estimated $1 trillion in revenues is lost due to the use of tax havens and the government must make up for this shortfall. This diversion ends up being shouldered by other companies and taxpayers and is transferred as higher debt for future generations. The recent Senate Budget resolution concluded that the problem of offshore tax havens “means that honest taxpayers face a higher burden.”
And the Oxford University Centre for Business Taxation has found that corporations allowed to defer taxation on offshore profits will leave that money offshore regardless of their home nation’s tax rate. Indeed, when given the opportunity to bring this money back to America at a lower tax rate in 2004, corporations used most of the money “to buy back stock from shareholders, not to invest in domestic operations.”
4 Responses to “Corporations Lowering Their Tax Rate More Than 20 Points Due To Offshore Deferral”
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Corporations don’t pay taxes, people do. By taking advantage of offshore deferral, these companies are fulfilling their fiduciary responsibility to their shareholders.
Who are those shareholders? Take a look in the mirror, sparky. If you have any pension benefits accruing, it’s you.
April 22nd, 2009 at 12:57 pmWhatever. The Bush and Obama Administrations worked together to deliver $165 billion to AIG, most of it under Bush, with an additional $30 billion under Obama.
Over 80% of that money was kicked back to various AIG counterparties – which is apparently precisely why AIG was chosen.
The biggest payouts, in billions:
Goldman Sachs $12.9
Société Générale $11.9
Deutsche Bank $11.8
Barclays $8.5
Merrill Lynch $6.8
Bank of America $5.2
BNP Paribas $4.9
HSBC Bank $3.5
Citigroup $2.3
http://www.businessweek.com
Barclays in particular is involved in shady dealings in offshore Cayman Island-type tax havens:
http://www.guardian.co.uk/business/2009/mar/16/revenue-investigates-barclays-tax-mole-claims
So, taxpayer dollars were siphoned off to line the pockets of a few billionaires… and guess what close Obama adviser happens to have a $5 billion stake in Goldman Sachs?
http://www.businessinsider.com/warren-buffett-almost-up-on-his-goldman-sachs-investment-2009-3
Yes, with a little help from the taxpayer – sorry about your home and your job and your kid’s future, but I gotta get paid, sucka!
April 22nd, 2009 at 1:12 pmIt’s known as corporafornication.
April 22nd, 2009 at 1:40 pmThe race to the lowest global common denominator on taxes is on. Don’t forget about the other sprints!
1. lowest global common denominator on worker pay/benefits
2. powder puff financial regulation
The big money boys always threaten to take their toys to a more favorable section of the globe. I suggest the waters off Somalia, where they can join their brethren.
April 22nd, 2009 at 1:49 pm