The current United States tax code allows some of the nation’s largest corporations to pay federal corporate income tax.
In fact, at least 55 of the largest companies in the United States have not paid federal corporate income tax on their 2020 profits, according to the Institute for Taxation and Economic Policy. Companies include names like Whirlpool, FedEx, Nike, HP and Salesforce.
“If a large, highly profitable company does not pay federal income tax, we have a real fair problem in our hands,” said Matthew Gardner, a senior associate at the Tax and Taxation Agency, CNBC. Economic Policy (ITEP) said.
In addition, it is completely legal and within the limits of the tax code, corporations end up not paying federal corporate income tax, resulting in billions of dollars in revenue loss to the US government.
” [There’s] A bucket of tax incentives for companies that are intentionally on the tax code. Overall, they cost the federal government about $ 180 billion each year. By comparison, corporate taxes bring in $ 370 billion a year, “said Sai-Huang, executive director of the NYU Tax Law Center, citing the Tax Foundation’s research at CNBC.
CNBC has approached FedEx, Nike, Salesforce and HP for feedback. They refused to provide the report or did not respond before it was released.
The 55 companies cited by ITEP would have paid a total of $ 8.5 billion. Instead, they withdrew $ 3.5 billion in taxes and withdrew a total of $ 12 billion from the US government, the company said. The figures do not include companies that paid only some of these taxes, but not all.
“The fundamental problem here is that companies have two different ways of calculating their profits,” Garrett Watson, a senior policy analyst at the Tax Foundation, told CNBC. “The amount of profit that companies can declare for financial purposes will be very different from the profit they declare [for tax purposes.] ⁇
Some tax expenditures come in a variety of forms, with some businesses taking advantage of rules that allow them to reduce their effective tax rate.
For example, Gardner’s research on Amazon taxes from 2018 to 2021 shows that U.S. pre-tax revenue was $ 79 billion. According to Gardner, Amazon paid $ 4 billion in federal corporate income tax over those four years, equivalent to an effective annual tax rate of 5.1%. ITEP Reportedly, a quarter of the federal corporate tax rate is 21%.
Amazon told CNBC in a statement: ” By 2021, we have recorded $ 2.3 billion in federal income tax expenditure, $ 5.2 billion in other federal taxes and more than $ 4 billion in all types of state and local taxes. We collected an additional $ 22 billion in sales taxes for US states and territories.”
The controversial form of federal tax expenditure is to convert profits. Foreign company income tax – 0% to 10.5% – may encourage the transfer of profits to tax havens.
For example, Whirlpool, an American company known for making home appliances in the United States and Mexico, was cited in a recent case involving both. American and Mexican taxes.
” [Whirlpool] He did this by doing a Mexican operation for a Mexican company that had no employees and then owning that Mexican company with one employee, Luxembourg Holding, “Huang told CNBC.” Then he tried to act like that because of the mix. US, Mexican and Luxembourg tax rules … He used the disconnect between all these tax systems and tried to avoid the tax and all these countries. No court, it goes a long way. ⁇
Whirlpool defended its actions in a statement to CNBC: The lawsuit, which was filed before the sixth round, did not seek to avoid US taxes on profits made in Mexico. This tax dispute has always existed in the United States when those profits were taxed. In fact, many years before the original tax court ruling in 2020, Whirlpool had already paid 100% U.S. tax on profits made in Mexico. Simply put, Whirlpool thought the IRS should have paid those U.S. taxes sooner. ⁇
Watch the video above to learn how the country’s most profitable companies are maneuvering through the complex tax system and what policy solutions can close some loopholes.