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Want to hear something worth having a tea party about? Some of the largest US corporations have mastered the art of evading taxes by booking expenses in the US and profits in low-tax countries.
As companies send off their corporate tax filings on the March 15th filing deadline, think about the multi-billion dollar corporations which Forbes reports had lower tax rates than you did:
Hewlett-Packard (NYSE:HPQ) earned pretax income of $9.4 billion, but managed to keep their tax rate the same as someone earning less than $33,950 a year. Their trickery? Book profits at lower-tax foreign subsidiaries.
Verizon (NYSE:VZ) has a lovely 10.5% tax rate. That’s better than a long term capital gain. Although Verizon earned $11.6 billion in pretax income, they have diverted much of their income through foreign wireless partner Vodafone.
Chevron (NYSE:CVX) paid $8 billion in taxes on $18.5 billion in pretax income. So why did they make the list? Chevron only sent Uncle Sam a check for $200 million. The rest was paid abroad in lower-tax countries. I think they should change their logo colors from red, white and blue to something more representative of the Caymans.
We all know Ford (NYSE:F) and other car makers have been skidding since the recession began. The struggling car maker still managed to earn $3 billion in pretax income. The beauty? Ford only plunked down $69 million in taxes — a 2.3% tax rate.
Not bad considering all the other subsidies, bailouts, and cash for clunkers we’ve already given as gifts to one of the oldest car manufacturers in the world.
ExxonMobile (NYSE:XOM) did pay $17.6 billion in taxes on $37.3 billion in pretax income. However, unlike Chevron, none of Exxon’s taxes were paid in the US. That’s funny … I think they sell a fair amount of profitable gasoline here.
Bank of America (NYSE:BAC) earned pretax income of $4.4 billion in 2009, yet the financial services super market tallied up a $1.9 billion tax benefit.
How could such a travesty occur? Bank of America scoured the tax code for 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.
Making matters worse for the US Treasury, Bank of America has a provision for credit losses of $49 billion which will carry over for a long, long time.
Like those who received an Earned Income Credit (EIC), General Electric (NYSE:GE) actually made money on their tax filing this year! Although the industrial behemoth generated $10.3 billion in pretax income, they recorded a tax benefit of $1.1 billion. Don’t we all wish we could be in that bracket.
But big tax breaks are nothing new for the 12th largest company in the world. In 2008, GE’s effective tax rate was 5.3% versus the marginal US corporate rate of 35%. In 2007, it was 15%. You’d think GE would at least pay a little more for paper and administration costs considering their tax filing to the IRS is an astounding 24,000 pages when printed out.
Do you think these companies should be paying more in taxes? Let us know in the comments below …
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