Have You Ever Wondered What The Large Corporations Pay In Taxes?
With the tax deadline having just passed, and taxes still on the brains of many households
, you might be wondering what the large corporations pay in taxes each year. It may dishearten you to know that the largest corporation the IRS has to deal with each year consists of a whopping 24,000 pages in tax information - if it was printed out - and boasted a pre-tax income of $10.3 billion US. The amount of taxes paid; zero. As a matter of fact, General Electric recorded a tax benefit of $1.1 billion US. Avoiding taxes for companies like General Electric is nothing new. In 2008, its tax rate was 5.3 per cent, while in 2007 it was 15 per cent. Inside these pages you will find that G.E consists of two divisions. General Electric Capital and everything else from TV shows to engines and power plants, so if it paid taxes as a stand-alone company, the rate would be around 22 per cent.
It seems that GE Capital is the division that keeps the overall tax bill so low, losing $6.5 billion in 2009 but gaining $4.3 billion over seas. Not only do the U.S. losses balance out the overseas gains, but GE can defer taxes on that overseas income indefinitely. It's the tax benefits from overseas operations that entice many large multinational companies to set up shop, resulting in lower tax rates than the rest of us. The profitable idea is to put costs in high-tax countries and profits in low-tax countries. This strategy has kept some $28 billion out of the U.S. Treasury by engaging in transfer pricing arrangements.
Not all mega corps are enjoying such low tax rates. Companies such as Exxon Mobil, for instance, reported the largest income tax expense than any other U.S. company in 2009, paying some $15 billion or 47 per cent of pre-tax earning. Both ConocoPhillips and Chevron reported similar tax rates. The Obama administration is hoping to put an end to this by proposing it do away with tax deferrals on overseas income. If passed, a U.S. company that pays a 25 per cent tax on profits in China would also have to pay an additional ten per cent income tax to the IRS, increasing it's corporate rate to 35 per cent. Companies among the top 25 earners, such as Hewlett-Packard, admit that if these measures were passed, it would be a tax hike amounting to billions of dollars.
Whether more taxes are gained from large corporations or not, our personal tax brackets will continue to dictate what we owe. Although most of us are not able to write off as many of our activities as large corporations, doing some research, or hiring a professional may help you to see if there are deductions you could be missing.
by: Molly Wider
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