TPT May 2017

G LOBA L MARKE T P L AC E

• Individual industries have successfully lobbied for specific tax breaks that effectively function as subsidies. Matthew Gardner, a senior fellow at the institute and a co-author of the study, told the Times , “One of the things that jumps out pretty starkly is there’s a real gap between the tax rates paid by different industries.” Over the 2008-2015 period covered by the report, utilities logged an effective tax rate of just 3.1 per cent. Industrial machinery; telecommunications; and oil, gas and pipeline companies paid roughly 11.5 per cent. Internet services paid 15.6 per cent. In just two sectors – health care and retail – companies paid more than 30 per cent of their profits in federal income tax. › Ms Cohen concluded her article where it began, with the avowal by the new US president and his party to change the corporate tax code. “Republicans say their tax overhaul will eliminate some of the biggest loopholes,” she wrote.“[While] critics counter that the substitute will end up further reducing companies’ tax bills.” › On the broader topic of tax code revision in general, some tax incentives – including those enacted by the US during the 2007-2009 recession – were meant to boost economic growth and hiring. But, according to the 7 March report from the Institute on Taxation and Economic Policy, often they did not work that way.

the companies – nearly 40 per cent – paid no taxes in at least one of the years between 2008 and 2015. Eighteen of these incurred a total federal income tax bill of less than zero over the entire eight-year period – meaning that they received rebates. The institute, a liberal-leaning research group in Washington, used the companies’ own regulatory filings to compute their tax rates. Here, edited for concision, are the main points from Ms Cohen’s review of methods by which companies legally avoided paying taxes. (“Profitable Companies, No Taxes: Here’s How They Did It,” 9 March). • Multinational corporations have ways of booking profits overseas, out of the reach of the Internal Revenue Service. “The truth is that we have a rigged tax code that has essentially legalised tax dodging for large corporations,” said Senator Bernie Sanders, the Vermont independent, citing evidence in the Institute on Taxation and Economic Policy report. “Offshore tax haven abuse has become so absurd that one five-storey office building in the Cayman Islands is now ‘home’ to more than 18,000 corporations.” • Other companies qualified for accelerated depreciation, enabling them to write off most of the cost of equipment and machinery before it wore out. Some saved billions in taxes by giving options to top executives to buy stock in the future at a discount. The companies then get to deduct their huge payouts as a loss.

Dorothy Fabian, Features Editor (USA)

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