In a report by the General Accounting Office (GAO), it was found
that large, profitable U.S. corporations paid
an average effective federal tax rate of 12.6% in 2010. This differs greatly
from the tax rates imposed on U.S.
companies, which are the highest official corporate tax rate in the world.
The
federal corporate tax rate stands at 35%, and jumps to 39.2% when state rates
are taken into account. But thanks to things like tax credits, exemptions and offshore tax havens, the actual tax burden of American companies
is much lower.
The
GAO report was commissioned
by Senators Carl Levin (D-MI) and Tom Coburn (R.-OK) in order to evaluate the current
corporate tax structure. The GAO study looked at taxes paid by profitable U.S.
corporations with at least $10 million in assets and even when foreign, state
and local taxes were taken into account, the companies paid only 16.9% of their
worldwide income in taxes in 2010.
Republicans as well as President Obama have called for a lower statutory corporate rate
along with the closing of loopholes. The prospects for such reform appear
remote for now, given the fractious nature of the current Congress.
The
GAO's calculation for effective corporate tax rates is lower than a number of
previous estimates. That's in part because the office excluded unprofitable
firms, which pay little or no taxes, from its analysis. If those firms' losses were
included, total net income used to calculate the average tax rate would be
reduced, and would not "accurately represent the tax rate on the
profitable corporations that actually pay the tax," the GAO said.
The
GAO used figures on taxes paid from actual IRS returns, which it noted were
"on the whole, lower than the tax liabilities reported in the corporate
financial statements." U.S. corporate tax collection totaled 2.6% of GDP
in 2011, according to the Organization for Economic Cooperation and
Development. That was the eleventh lowest in a ranking of 27 wealthy nations.
The
Senate's Permanent Subcommittee on Investigations has hauled several corporate
executives to Capitol Hill over the past year for testimony on their tax
practices. A report released by the subcommittee last month charged that Apple (AAPL) used a complicated system of international
subsidiaries and cost-shifting strategies to avoid paying taxes on some $74 billion in income from
2009 to 2012.
In
September, the subcommittee heard from Microsoft (MSFT) and Hewlett-Packard (HPQ), whom Levin
called "case studies of how U.S. multinational corporations...exploit
the weaknesses in tax and accounting rules and lax enforcement."
A subcommittee report at the time alleged that Microsoft had saved
nearly $7 billion off its U.S. tax bill since 2009 by using loopholes to shift
profits offshore. H-P, the report said, avoided paying taxes through a series
of loans that shifted billions of dollars between two offshore subsidiaries.