The more money American companies make, the better they are at not paying tax on it. In fact it’s not uncommon for them to make billions in profits and end up with tax rebates. Many pay lower effective tax rates than their very lowest paid employees - yet corporate executives complain that taxes are still too high.
It's a question of fairness, a populist issue of Wall St versus Main St. Corporations hold trillions of dollars in offshore havens, avoiding taxes, and going totally unchecked as the practice is still legal. That’s lost revenue the government badly needs in order to lower the deficit, invest in infrastructure and pay for social programs.
The same executives with fat compensation packages who are skimping on taxes insist welfare programs are too expensive and should be cut back. Sacrifice is for ordinary Americans to make, it seems - not for the Fortune 500.
The group Americans for Tax Fairness say that corporate taxes are near a 60-year low. Americans want corporations to pay more taxes, polls say. But so far, no one in power wants to take on the power and influence of Corporate America. The government is reluctant to call these organisations out, for fear they'll outsource their business to other more amenable countries. And then, of course, there are the powerful corporate lobbyists who keep the politicians on their side.
Here’s a baker’s dozen of the worst offenders. These are the most flagrant tax evaders and the jaw-dropping amounts they get away with.
There are good corporate citizens across the country paying their fair share in taxes and still making enough to grow their business and please their shareholders. Corning just isn’t one of them.
In fact, the Citizens for Tax Justice calls the glass and ceramics maker a “champion corporate tax evader.” From 2008 to 2012, the New York company made $3.4 billion in profits and actually got a tax refund of $10 million, essentially a negative tax rate.
It's just one of many American corporations that divert cash to foreign tax-free jurisdictions, with $11.9 billion offshore havens avoiding paying more than $4 billion in U.S. income taxes
Drugmaker Merck had a negative effective tax rate during the second quarter of 2013. It got money back despite the fact that its income before taxes soared 52% to $1.9 billion during the quarter.
The polite language says that Merck “realized” profits in lower tax jurisdictions. If you think the tax evasion shell game is a recent phenomenon, think again. The IRS nailed Merck for evasion from 1993-2001 and negotiated an out of court settlement of $2.3 billion.
But the cases are so intricate and multinationals have such deep pockets and formidable legal departments that the case took 8 years to settle. But Merck was back on the horse right away. In 2009, Merck joined the negative tax rate club by getting a $55 million refund on $5.7 billion in U.S. profits. In 2012, Merck stashed $53.4 billion in offshore tax haven countries to avoid paying income taxes of $18.69 billion.
The famous import/export company received a $135 million tax refund from the IRS in 2011. That was from U.S profits of $2.7 billion. The company made $6 billion over the last three years but provisions for writing off the cost of new equipment, in this case, airplanes gave FedEx a $2.1 billion taxpayer subsidy.
And they’re not finished there: FedEx receives more than $1 billion a year from the U.S. Postal Service to provide air service for mail shipments.
A recent report by Americans for Tax Fairness claims Walmart keeps $21.4 billion in profits offshore, safe from those nasty federal taxes most Americans pay. They are also masters at using a loophole allowing them to deduct executive pay increases if they're deemed to be performance-based.
That costs the honest taxpayer $300 million over the last six years.
The company employs 74 lobbyists and has spent $32.6 million lobbying to lower taxes even more over the past five years. Let’s just say that at least they're stimulating the economy inside the Beltway.
Verizon are an example of yet another accounting miracle from a communications company. From 2008 to 2013,Verizon made over $42 billion in U.S. profits and got a tidy little tax refund of $732 million. Effective tax rate: minus 2%.
In 2012, the company saved another $630 million in taxes by stashing $1.8 billion in offshore tax havens.
Apple reportedly keeps $138 billion abroad, an amount which would generate $45 billion in taxes. A Senate committee charged that Apple uses "ghost companies," incorporated in Ireland as "a conduit for shifting billions of dollars in income from the U.S.".
Consider a subsidiary called Apple Operations International which had $30 billion on its books despite, apparently, having no employees. The European Union is taking a hard look at Apple’s Irish connection and is threatening a crackdown. Would that stop Apple and companies like it from finding another haunted tax haven?
The renowned Seattle-based aircraft manufacturer made over $26.4 billion in U.S. profits from 2008-2013. At the standard corporate tax rate, it would have had a tax bill of just under $9 billion.
Instead, it received a $401 million refund from the IRS, making their effective U.S. corporate income tax rate minus 2 percent.
Boeing plays hardball to squeeze out as much public money as they can. The company threatened to move its 777 passenger jet project out of Washington in 2013, inspiring the state government to cough up $8.7 billion in tax breaks.
Good Jobs First found 137 tax breaks in favor of Boeing, totaling $13.2 billion. It's like companies are telling governments to stop spending so much money... But don't stop spending it on us. Because sick American citizens probably don't need all that insurance.
From 2010-12, the energy giant managed to get an income tax rate of just 15 percent, which, it must said, is way more than most of its peers.
Still, that rate is less than half of the 35% rate they’re supposed to pay, so in effect the company got a tax subsidy worth $6.2 billion. On top of that, Exxon had $43 billion in offshore profits, on which it paid no US tax at all.
If Acrobatic Accounting were an Olympic sport, Pfizer would be at the top of the podium. The pharmaceutical giant made $43 billion from 2010 to 2012, and paid literally zero tax on that amount.
Pfizer just shifted the profits offshore to tax-free jurisdictions. They even picked up a couple of billion in federal tax refunds. They transferred rights to their Viagra gold mine to a shell company in the European tax haven of Liechtenstein. The company is said to have stashed as much as $73 billion in profits out of reach offshore.
4 General Electric
GE is a true conglomerate that’s way more than just appliances. Ranked 26th in the Fortune 500, it’s into everything from weapons to finance to health care. It’s also a corporate triple threat, maximising profits while stiffing the American government and workforce.
GE has $110 billion stashed offshore, allegedly. This means avoiding $40 billion in taxes a year, enabling them to pay an effective tax rate of four percent – a ninth of the actual corporate tax rate.
$33.9 billion in US profits between 2008 and 2013 resulted in a $3 billion refund from the IRS - an actual tax rate of minus 1%. Then, the federal government gifted GE contracts worth $22 billion in taxpayers’ money. In return, GE hired thousands of workers... In China and Mexico.
CEO Jeffrey Immelt, who makes $19 million a year, has also advocated increasing taxes. On working families. Apparently corporate taxes are still too high.
There seems to something especially egregious about ducking taxes, when the act comes from a company that wouldn't exist if not for a gigantic bailout of $2.5 trillion taxpayer dollars.
Citigroup was broke after the 2008 financial crisis, before Washington came to the rescue. After 5 years of lawyering they agreed to a $2.2 billion settlement to cover damages caused by the company’s lending abuses.
The cost of doing illegal business is apparently still a cost of doing business, and is therefore tax-deductible. Citigroup shared their legal bill with all those citizens who actually pay taxes. They paid zero tax on profits in 2010.
To top it off, Citigroup had $42.6 billion in foreign profits parked offshore in 2012 on which it paid no US taxes. $11.5 billion would have been owed in taxes if the money remained in the U.S.
Company founder Bill Gates is one of the most renowned philanthropists in the world, giving away huge sums to good causes. But his company is a big-time baddie when it comes to paying tax.
According to filings with the Securities and Exchange Commission, Microsoft is keeping $92.9 billion in profits off shore, the equivalent of the two year operating budget of its home state of Washington. That’s almost $30 billion in taxes the U.S. treasury are missing out on.
1 Bank of America
For sheer nerve, it’s tough to beat the Bank of America. In 2012, the Bank had more than 300 separate subsidiaries - or shells in the shell game - incorporated in offshore tax havens. These included the Cayman Islands and other places with no corporate taxes.
The Bank made $17.2 billion in profits that year. If that income were declared, they would have owed $4.3 billion in federal income tax. But by leaving those profits stashed in those tax-free havens, Bank of America paid zero tax to America.
B of A was deeply involved in the mortgage crisis of 2008 that brought the global economy to the point of collapse. So, they gladly accepted a $1.3 trillion bailout from Washington. The Federal Reserve Board also gave the Bank amnesty from all legal claims and protection against losses from toxic mortgages up to $118 billion. It still made $4.4 billion in profits and somehow ended up with a $1.9 billion tax refund.
At the same time, CEO Brian Moynihan (salary & benefits: $13.1 million) seems to think taxpayers’ entitlements are too lavish. He endorsed calls to raise the eligibility age for Medicare to 70, and make significant cuts to Social Security.