Many U.S. multinationals pay less than corporate tax rate

U.S.-based multinational companies, even as they maintain that the top 35 percent U.S. corporate tax rate is too high, pay far less in effective rates and often face tax burdens similar to their rivals overseas.

Officials with companies including General Electric Co., Johnson & Johnson, Bank of America Corp., United Technologies Corp., Exxon Mobil Corp., Caterpillar Inc. and Microsoft Corp. met with Treasury Secretary Timothy Geithner last week to discuss corporate taxes. Some companies are pushing for an overhaul of the U.S. tax system.

Recent studies show that U.S.-based multinationals on average pay effective tax rates of 26 percent to 28 percent, slightly more than a worldwide average of about 25 percent.

The 35 percent rate is "all you hear about, but that really isn't a sufficient way of looking at things, because that simply is the statutory rate," said George K. Yin, a former chief of staff for Congress's Joint Committee on Taxation. Yin, now a law professor at the University of Virginia, said the U.S. tax system has "plenty of holes in it" that reduce what corporations pay.

General Electric, the Fairfield, Conn.-based manufacturer, paid an average effective tax rate of 11.5 percent over the past five years. In 2009, overseas revenue accounted for more than half of the company's total $156.8 billion in sales. By the end of 2009, the company had reinvested $84 billion in foreign subsidiaries, according to its annual report.

'Roughly the average'

Among the companies sending representatives to meet with Geithner were Dow Chemical Co., Procter & Gamble Co., Honeywell International Inc., MetLife Inc., Eli Lilly & Co., Walt Disney Co., Coca-Cola Co., PepsiCo Inc. and Emerson Electric Co.

While expressing support for lowering the statutory tax rate, Geithner said Jan. 12 that effective U.S. tax rates "are roughly the average of the other economies."

Effective rates will figure into the debate over lowering the U.S. statutory rate, which will be the highest in the world if Japan cuts its rate by five percentage points this year as planned. Brigitte Schmidt Gwyn, senior director of public policy at the Washington-based Business Roundtable, said "the trend outside the U.S. is not to stop lowering rates."

Reducing the corporate tax rate by one percentage point would cost the U.S. Treasury $8 billion a year. In a question-and-answer session following a Jan. 12 speech at Johns Hopkins School of Advanced International Studies in Washington, Geithner said that any corporate rate cut must "not lose revenue on net," meaning existing breaks in the tax code would have to be reduced to finance a rate cut.

Tax return data are confidential, though publicly traded companies report anticipated tax liabilities in securities filings and annual reports.

Source: http://www.northjersey.com