PaulChristenson

Most US Firms Avoid Federal Taxes

By JENNIFER C. KERR
,
AP
<DIV class=articleDt>WASHINGTON (Aug. 12) - Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.


Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.
"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich. (But they provide so many high paying jobs to our citizens...Those corporations that haven't outsourced most of the jobs overseas...)
An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.
"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.
The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits. (Tax credits the biggest boondoggle of them all, States bid against each other for businesses, that pack up and leave when the credits run out...)
More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.
The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.
Dorgan and Levin have complained about companies abusing transfer prices -- amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.
"It's time for the big corporations to pay their fair share," Dorgan said.(Gee, You think???...)

Paul in VT

I used to own an ant farm but had to give it up. I couldn't find tractors small enough to fit it.
-- Steven Wright

Ducati996

Interesting indeed and its believeable considering you only have to be smarter than the one doing the auditing or reviewing of the code -
which is easy based on my observations LOL

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vansimplement

So then my question is whether or not corporations can get away with the same thing in other countries, or if foreign countries are more strict in their application of tax laws.

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LarryRB

Be specific here, they did not pay taxes on profits,, there is a big difference,, Many see this as they pay nothing and this is simply not true,

"this morning I woke up with nothing to do, it is now afternoon and I have over half of it done".
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GreenWannabe

And let's see here - - who wrote the income tax laws? Maybe the same people who requested the study are involved?

Ducati996

Report: Most corporations paid no 2005 income tax

BY EMI ENDOAND DANNY TEIGMAN August 13, 2008Roughly two-thirds of corporations, both domestic and foreign-owned, paid no U.S. corporate income taxes in 2005, according to a federal report released Tuesday.

The Government Accountability Office, an arm of Congress, found that foreign-owned corporations generally reported lower tax liabilities than U.S.-controlled corporations from 1998 to 2005, with a greater percentage of large foreign corporations reporting no liability in a given year. (See the full report.)

In 2005, nearly 67 percent of 1.9 million U.S. corporations paid no federal income tax.

Of those, 3,500 were considered large corporations. Large corporations, with at least $250 million in assets or at least $50 million in receipts, account for more than 90 percent of corporate assets, the study said.




Also in 2005, about 65 percent of 59,000 foreign-owned corporations reported no tax liability.

Corporations can legally avoid tax liability by reporting no income or no net income after expenses, the report and tax analysts said.

The majority of corporations that reported no tax liability in 2005 had more in deductions for salaries and other expenses than they did in income, the study said.

Anthony Sabino, who practices corporate law in Mineola, said the report was not surprising given the complex tax code.

"This is perfectly legal; these are simply people taking advantage of what the law allows," said Sabino, a professor of law at the Peter J. Tobin College of Business at St. John's University. "There's a huge gulf between the money a company makes and what, under the tax code, is deemed to be the actual amount of income subject to taxes," he said.

Two major companies on Long Island Tuesday didn't have much to say about the tax code, except to say that they had paid their share.

CA spokeswoman Jennifer Hallahan, said the Islandia-based software company declined to comment on the report or the business practices of others.

According to a financial filing, CA paid an effective tax rate of about 38 percent in fiscal year 2008.

Arrow Electronics spokesman John Hourigan said, "As a U.S.-based company, we comply with regulation, and we do indeed pay corporate taxes." The electronic parts distributor, Long Island's largest in terms of revenue is based in Melville.

Sen. Byron Dorgan (D-N.D.), one of the lawmakers who requested the study, said in a written statement, "We need to plug these tax loopholes, and put these corporations back on the tax rolls. It's time for the big corporations to pay their fair share."

But William Ahern, a spokesman for the nonpartisan Washington, D.C.-based Tax Foundation, said that of the 14,000 large U.S. corporations, about 75 percent did pay federal corporate income taxes.

"In describing 2005, a year in which corporate income tax collections rose dramatically at the state and federal levels, the GAO report is completely consistent with what you'd expect: almost all firms that were profitable reported paying taxes."

The report said that, while multinational companies may be able to reduce their overall tax liability by manipulating prices they charge on intercompany transactions, it did not address that issue.

DEDUCTIONS ARE LEGAL
About 80 percent of the companies that paid no corporate income taxes in 2005, according to the GAO study, reported that they had zero taxable income. Anthony Sabino, 50, a Mineola-based corporate tax lawyer, said the most common legal deductions include the cost of raw materials, employee salaries, utilities, equipment purchases and office supplies. Additional "credits" further reduce taxable income, he said, chiefly in a company's research and development.

Other common deductions listed in the GAO study include: Travel, meals, entertainment expenses, insurance premiums, legal and professional fees, and dividends paid in cash on stock held by employee stock ownership plans



This may shed a little bit more info on the subject