Exxon, GE & Others Paid $0 tax to U.S.

[MTAtech]

So the next time someone tells you about the high taxes corporations pay, remember this:

From Forbes:

HOUSTON -- 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.

The most egregious example is General Electric ( GE). 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%.

...

ExxonMobil ( XOM) paid more income taxes than any other U.S. company last year, some $15 billion, or 47% of pretax earnings. Exxon's peers Chevron ( CVX) and ConocoPhillips ( COP ) 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.

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.

[Steve R Jones]

Great. Now I feel guilty for doing the long form and claiming everything I'm allowed to claim

[Steve R Jones]

If the money is kept in a seperate country where they pay those countries taxes on it, why should they pay uncle sam too?

As long as its NOT a US Company keeping the money anywhere would be cool as far as the US IRS is concerned.

[RicheemxX]

As it says in the ABC report multinational companies are smart they "put costs in high-tax countries and profits in low-tax countries." A US division starts making a ton of money what do they do, they ship it over seas and ship another loosing division in here so they can keep all those profits.

[MTAtech]

If the money is kept in a seperate country where they pay those countries taxes on it, why should they pay uncle sam too?

That's how current law is structured. That just means we should change the law. It is wrong to allow companies that make billions in profits and use public services to contribute nothing.

[brandon184]

That's how current law is structured. That just means we should change the law. It is wrong to allow companies that make billions in profits and use public services to contribute nothing.

Contribute nothing? Gimme a break. Exxon provides tens of thousands of well-paying jobs and distributes billions of dollars of dividends every year to investors who include Exxon and companies like Exxon in their retirement portfolios.

[Chuckiechan]

From Business Week

Exxon: Profit Pirate or Tax Victim?

Corporate taxes are anything but simple, and flashy buzz words don't do it justice. It's complicated because the government makes it that way.

Same with Cap n Trade. They'll just pass them right along.

Anyone involved with management of a business can tell you, everyone seems to have their hand in your profit. If a single phone line in your residence costs $ 50.00 a month, it's $ 100 a month for a business.

[Toadman]

MTA doesnt work in the private sector CC. He doesnt understand building codes, permits, affirmative action, ordinances, EPA regs, Sarbanes-Oxley restrictions, local, state and federal pay as you go taxation, lobbyist kickbacks, etc. It's just that they owe no money on April 15th and should feel guilty for robbing the King of his due pennance. Those employing such savvy accountants should be applauded to have a balance due of zero.

A tax refund is an overestimated payment MTA. Not a gift back to the corporation. If there's any loopholes then it's upon the IRS to plug them. Why do you think that is?

[zen]

So what happens to the price of oil if they pay us taxes?

[Chuckiechan]

So what happens to the price of oil if they pay us taxes?

I don't think the price of oil will change, but increased taxes on gasoline for example, just make the oil companies the tax collectors for the government.

The cost of oil will go up.

For example, in Bakersfield there are wells that have been pumping since the '40's. They are lifting at $ 3.00 a bbl, with a world price of $ 80.00. Probably the only way the US can dig itself out of the hole Obama has dug us is to further exploit our natural resources to bring income into the Treasury.

The value of oil in the ground is zero.

[MTAtech]

The tax laws are complicated because corporate lobbyists lobbied to have them that way. It's clear that we don't have to worry about big corporations. They seem to take care of themselves.

So what happens to the price of oil if they pay us taxes?

If the U.S. closed the loopholes Exxon and GE would close the 20 sham companies in foreign lands and pay taxes here. It would not effect the price of oil. These companies pay a decent share of taxes -- just not to us.

It's unbelievable that people like Chuck can seriously think that what Exxon and GE not paying any U.S. taxes is right and fair. It certainly is legal and that's why it is important to re-write the tax laws to close such holes.

Remember, them not paying any taxes means that everyone else is paying Exxon and GE's share.

[brandon184]

MTA, my granny relies on her investments to help put food on her table. If we follow your plan of stomping on the throats of corporate America via increased taxation, those companies will:

1) Not grow as quickly, giving their investors lower capital appreciation, and/or;
2) Not distribute dividends or distribute fewer/lower dividends to their elderly investors.

Why do you want my grandmother to live in a back alley and starve? What did she ever do to you?

[Atomic Rooster]

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.

I can't seem to find that line in the article MTA.

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."

[MTAtech]

What public services did they use when they are doing all of the operations in other countries?

The 'operations' in other countries are paper companies existing only to move money around.

However, I'll ask you, why shouldn't they pay American taxes when they use our roads, drill on public lands, use our courts, etc. etc?

Brandon, you seem to be arguing that corporations shouldn't pay taxes. Why should everyone else pay taxes so these companies with billions in profits shouldn't? Regarding your grandmother, whether Exxon pays taxes to America or foreign countries isn't going to change the dividend. But even if it did, why should stockholders be entitled to higher dividends earned by short-changing the American tax-payers?

[brandon184]

Brandon, you seem to be arguing that corporations shouldn't pay taxes. Why should everyone else pay taxes so these companies with billions in profits shouldn't? Regarding your grandmother, whether Exxon pays taxes to America or foreign countries isn't going to change the dividend. But even if it did, why should stockholders be entitled to higher dividends earned by short-changing the American tax-payers?

Corporations shouldn't pay income taxes because they create and maintain jobs, which are far more lucrative from a tax perspective and more beneficial to society as a whole.

Have some global perspective on this issue. If you want to declare war on corporate America, they will shift their focus on to other markets. Places like China, India and Brazil are all the new hot economies. If you want jobs, you need corporations. If you want corporations, you need to be competitive from a tax perspective.

Whether or not you want to accept it, private sector growth is what fuels the American economy. Tax-payer-funded government stimulus is not going to propel America into competitive GDP growth over the next few decades.

.

[brandon184]

Asymmetrical Information: Why I'm in Favor of

[Chuckiechan]

These companies pay a decent share of taxes -- just not to us.

Then they will have to pay taxes in both places, so prices will rise accordingly to hold margins:

Gross profit - foreign taxes
And then
Gross profit - US taxes
Equals - net profit after tax hit A plus tax hit B.

Suddenly, it's not worth it anymore. There is a "risk premium" included in the margin. Basically it works like this:

You have to have a greater retrun on investment than you can get from a bank, then you add the risk of blowing it on dry holes, accidents, etc. to come up with a margin. You beat that you are a hero. You don't you are broke. These margins aren't "assigned", rather they are historical in nature - you have to make a certain percentage in "x" type of business to succeed. All businesses have a common margin you need to meet to stay in business. (that's why Mr. Cheapo down the street folded. Or Mr. Cheapo isn't any cheaper than the other guys.)

Example:

A US oil company in Canada is a foreign company with headquarters in the USA, so you want them to pay Canadian taxes plus domestic taxes? So you are saying if the Canadian company earns 1 billion dollars, they pay Canadian tax on that billion, and then US tax on that same billion?

Isn't that tax burden a bit much?

I think the flaw in your thinking is that somehow you can keep forcing the companies to pay more and more taxes and somehow only revenue to the Treasury changes. That isn't the way the world works.

[zen]

Then they will have to pay taxes in both places, so prices will rise accordingly to hold margins:

Gross profit - foreign taxes
And then
Gross profit - US taxes
Equals - net profit after tax hit A plus tax hit B.

Suddenly, it's not worth it anymore. There is a "risk premium" included in the margin. Basically it works like this:

You have to have a greater retrun on investment than you can get from a bank, then you add the risk of blowing it on dry holes, accidents, etc. to come up with a margin. You beat that you are a hero. You don't you are broke. These margins aren't "assigned", rather they are historical in nature - you have to make a certain percentage in "x" type of business to succeed. All businesses have a common margin you need to meet to stay in business. (that's why Mr. Cheapo down the street folded. Or Mr. Cheapo isn't any cheaper than the other guys.)

Example:

A US oil company in Canada is a foreign company with headquarters in the USA, so you want them to pay Canadian taxes plus domestic taxes? So you are saying if the Canadian company earns 1 billion dollars, they pay Canadian tax on that billion, and then US tax on that same billion?

Isn't that tax burden a bit much?

I think the flaw in your thinking is that somehow you can keep forcing the companies to pay more and more taxes and somehow only revenue to the Treasury changes. That isn't the way the world works.

Which is why I asked, "What does this do to the price of oil?"(meaning our price for gas,oil ect.) You replied earlier, "I don't think the price of oil will change."

[Chuckiechan]

Which is why I asked, "What does this do to the price of oil?"(meaning our price for gas,oil ect.) You replied earlier, "I don't think the price of oil will change."

Depends on what you mean by "price". The cost of lifting oil from the well is the first "price" - cost of exploration, drilling, and pumping.

I really don't know what the "price" will do, but the costs will go up. As costs go up, economic activity declines and price falls due to excess supply.

"Price" is a bad place to start since there are "prices" all along the way. My "price" is your "cost".

So I guess I must change my mind and say "prices" will rise as costs rise.