PwC: U.S. Companies Pay World’s 6th-Highest Effective Tax Rate

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    Apr 18, 2011 2:14 PM GMT
    http://taxprof.typepad.com/taxprof_blog/2011/04/pwc-us-companies.html

    PwC calculated and compared effective tax rates by country for the 2,000 largest companies in the world as ranked by the 2010 Forbes Global 2000 list. The data for the study are from company financial statements as reported in the S&P Global Vantage database.

    Companies headquartered in the United States faced an average effective tax rate of 27.7%compared to a rate of 19.5% for their foreign-headquartered counterparts. By country, U.S.-headquartered companies faced a higher worldwide effective tax rate than their counterparts headquartered in 53 of the 58 foreign countries.


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    Apr 18, 2011 2:50 PM GMT
    That seems impossible given how many of the largest companies paid 0%. Seems like Bush's "fuzzy math."
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    Apr 18, 2011 2:56 PM GMT
    Christian73 saidThat seems impossible given how many of the largest companies paid 0%. Seems like Bush's "fuzzy math."


    Not sure what the motive for PwC to lie would be considering they are practically everywhere globally. Further, they note that this is for the largest 2000 companies. Do you have any evidence to the contrary or is this simply your gut feel?
  • rnch

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    Apr 18, 2011 3:00 PM GMT
    who is "PwC"?

    who funds them?

    who owns them?
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    Apr 18, 2011 3:03 PM GMT
    riddler78 said
    Christian73 saidThat seems impossible given how many of the largest companies paid 0%. Seems like Bush's "fuzzy math."


    Not sure what the motive for PwC to lie would be considering they are practically everywhere globally. Further, they note that this is for the largest 2000 companies. Do you have any evidence to the contrary or is this simply your gut feel?


    Well, this was a study done by the GAO under Bush:

    "Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

    The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005."

    http://www.reuters.com/article/2008/08/12/us-usa-taxes-corporations-idUSN1249465620080812


    10 Companies Paying the Least Taxes
    http://www.thestreet.com/story/11077452/1/10-companies-paying-the-least-in-taxes.html?cm_ven=GOOGLEN


    State Street Gets $885M tax refund
    http://articles.boston.com/2011-04-14/business/29418069_1_tax-refund-federal-taxes-tax-returns


    So, I don't see how we can have the highest effective rate, while some of out biggest companies and 72% of foreign companies operating here pay no tax on their revenues.
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    Apr 18, 2011 3:04 PM GMT
    rnch saidwho is "PwC"?

    who funds them?

    who owns them?


    PwC = PricewaterhouseCoopers. Disclosure: I used to work for PwC during my internships but that, was a really really long time ago.
  • rnch

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    Apr 18, 2011 3:06 PM GMT
    "you can prove ANYTHING with statistics"---Homer J. Simpson
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    Apr 18, 2011 3:07 PM GMT
    Christian73 said
    riddler78 said
    Christian73 saidThat seems impossible given how many of the largest companies paid 0%. Seems like Bush's "fuzzy math."


    Not sure what the motive for PwC to lie would be considering they are practically everywhere globally. Further, they note that this is for the largest 2000 companies. Do you have any evidence to the contrary or is this simply your gut feel?


    Well, this was a study done by the GAO under Bush:

    "Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

    The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005."

    http://www.reuters.com/article/2008/08/12/us-usa-taxes-corporations-idUSN1249465620080812


    10 Companies Paying the Least Taxes
    http://www.thestreet.com/story/11077452/1/10-companies-paying-the-least-in-taxes.html?cm_ven=GOOGLEN


    State Street Gets $885M tax refund
    http://articles.boston.com/2011-04-14/business/29418069_1_tax-refund-federal-taxes-tax-returns


    So, I don't see how we can have the highest effective rate, while some of out biggest companies and 72% of foreign companies operating here pay no tax on their revenues.


    re: no income taxes - this can also include dormant companies, subsidiaries that have been having losses, or just small minor companies that people hold on the side. I myself own a few corporations that don't have any activity and have a null balance. The survey that PwC however did was of the top 2000 firms globally which are obviously companies that have ongoing operations.
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    Apr 18, 2011 3:08 PM GMT
    rnch said"you can prove ANYTHING with statistics"---Homer J. Simpson


    Not sure what is being "proven" here - given that the survey was not intended to be US specific or to drive US policy specifically given that this is data that they present globally to their clients with other countries in the data set.
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    Apr 18, 2011 3:19 PM GMT
    I don't think that the large percentage is caused by subsidiaries or inactive businesses:

    Reuters article:

    "The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said."
  • rnch

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    Apr 18, 2011 3:22 PM GMT
    [quote][cite]riddler78 said...Not sure what is being "proven" here...[/quote]


    then why did you even post this ambiguous, misleading craapppppp?
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    Apr 18, 2011 3:41 PM GMT
    rnch said"you can prove ANYTHING with statistics"---Homer J. Simpson


    +1.

    Read an article yesterday on msbc that stated exactly the opposite. Guess you can spin anything to fit your agenda.
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    Apr 18, 2011 4:11 PM GMT
    Christian73 saidI don't think that the large percentage is caused by subsidiaries or inactive businesses:

    Reuters article:

    "The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said."


    Looking in detail at how PwC did the survey:
    - "PwC calculated and compared effective tax rates by country for the 2,000 largest companies in the world as ranked by the 2010 Forbes Global 2000 list. The data for the study are from company financial statements as reported in the S&P Global Vantage database."
    - "The effective tax rate is defined as total income taxes divided by pretax income."
    - "Pretax income is defined to be worldwide net income before income taxes, minority interest, and extraordinary items."

    What the difference is, is measurement of pre-tax income which can differ significantly for tax purposes versus accounting purposes. For instance, deferred tax liability on accelerated depreciation schedules can make a big difference.

    There's a solution though for these companies: move. And you can bet that they will if the divergence increases - you can also bet that PwC being a tax authority has done the math for a number of them given that taxes represent such a big cost for companies - sometimes even more than labor.
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    Apr 18, 2011 4:12 PM GMT
    rnch said
    riddler78 said...Not sure what is being "proven" here...


    then why did you even post this ambiguous, misleading craapppppp?


    It's a survey. Not ambiguous - ie it's showing the US in context with respect to other countries - but not deliberately aimed at the US. It didn't set out to prove that the US had the 6th highest effective tax rate in the world. It just happens to be that way.
  • rnch

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    Apr 18, 2011 4:20 PM GMT
    riddler78 said...it's showing the US in context with respect to other countries - but not deliberately aimed at the US. It didn't set out to prove that the US had the 6th highest effective tax rate in the world. It just happens to be that way.


    your reply just proves how "smart" Homer J. Simpson is!


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    Apr 18, 2011 4:25 PM GMT
    rnch said
    riddler78 said...it's showing the US in context with respect to other countries - but not deliberately aimed at the US. It didn't set out to prove that the US had the 6th highest effective tax rate in the world. It just happens to be that way.


    your reply just proves how "smart" Homer J. Simpson is!


    icon_idea.gif


    Getting the data right should matter to you. It's either a fact or it isn't. When companies move (and/or start entities), and they will, to cheaper countries it should not be a surprise nor can you say you haven't be forewarned.
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    Apr 18, 2011 4:38 PM GMT
    The effective tax rate is just the rate of tax the company has to pay. The amount they owe is completely different. Why? Because there are credits that reduce your tax owed amount.

    For example, in a personal income tax perspective. I am using very simple rounded numbers BTW.

    Taxable income = $100
    Tax rate (effective tax rate) = 5%
    Tax owed = $5 ($100 x 5%)
    Credit (Residential energy credit) = $3

    Total tax owed = $2 ($5 - $3)

    So its very possible that the effective tax rate is 27.7%. They just get a bunch of credits to offset the amount actually owed.

    PwC would not make up the numbers for the study. They would ruin their reputation which is the livelihood of their business.

    Hopefully this will help you guys with your debate.
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    Apr 18, 2011 4:44 PM GMT
    AvadaKedavra saidThe effective tax rate is just the rate of tax the company has to pay. The amount they owe is completely different. Why? Because there are credits that reduce your tax owed amount.

    For example, in a personal income tax perspective. I am using very simple rounded numbers BTW.

    Taxable income = $100
    Tax rate (effective tax rate) = 5%
    Tax owed = $5 ($100 x 5%)
    Credit (Residential energy credit) = $3

    Total tax owed = $2 ($5 - $3)

    So its very possible that the effective tax rate is 27.7%. They just get a bunch of credits to offset the amount actually owed.

    PwC would not make up the numbers for the study. They would ruin their reputation which is the livelihood of their business.

    Hopefully this will help you guys with your debate.


    I'm not debating the effective tax rates but, rather, pointing out how infrequently they are actually paid and why would Google (which paid zero last year) move their operations? Is there a country that's going to do better than zero?
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    Apr 18, 2011 4:46 PM GMT
    Christian73 saidThat seems impossible given how many of the largest companies paid 0%. Seems like Bush's "fuzzy math."


    but you said this.

    which is a percentage which is the tax rate. there were no dollar amounts mentioned.
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    Apr 18, 2011 4:49 PM GMT
    Christian73 said

    So, I don't see how we can have the highest effective rate, while some of out biggest companies and 72% of foreign companies operating here pay no tax on their revenues.


    You also said this.
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    Apr 18, 2011 4:50 PM GMT
    AvadaKedavra said
    Christian73 said

    So, I don't see how we can have the highest effective rate, while some of out biggest companies and 72% of foreign companies operating here pay no tax on their revenues.


    You also said this.


    I probably could have been more specific, but I was speaking to actual payments.
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    Apr 18, 2011 4:54 PM GMT
    Christian73 said
    AvadaKedavra said
    Christian73 said

    So, I don't see how we can have the highest effective rate, while some of out biggest companies and 72% of foreign companies operating here pay no tax on their revenues.


    You also said this.


    I probably could have been more specific, but I was speaking to actual payments.


    sure icon_wink.gif
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    Apr 18, 2011 5:02 PM GMT
    AvadaKedavra said
    Christian73 said
    AvadaKedavra said
    Christian73 said

    So, I don't see how we can have the highest effective rate, while some of out biggest companies and 72% of foreign companies operating here pay no tax on their revenues.


    You also said this.


    I probably could have been more specific, but I was speaking to actual payments.


    sure icon_wink.gif


    See? You're hot and sweet. That's why I like you. icon_wink.gif
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    Apr 18, 2011 8:59 PM GMT
    those poor companies. icon_cry.gif