10 of the Biggest Corporate Tax Cheats In America
If you or I were running a small business and we kept one set of books showing how much money we were making and a second set for the IRS that painted a picture of an enterprise on the brink of bankruptcy, we'd end up behind bars.
But that's standard operating procedure for corporate America. In fact, public corporations have to do it -- the law requires that they keep one set of books for their shareholders, and another for the IRS. As tax journalist David Cay Johnston explained, "Many corporations routinely tell investors they incur millions in corporate income taxes, while the financial records they give the IRS show they owe nothing or are due refunds."
In the records kept by the IRS, corporations cook the books "by using tax shelters, offsetting income with losses from years ago, and employing countless other devices that make them look like paupers to the IRS but money machines to investors."We got a peek into this process last week, when the New York Times revealed that multinational giant GE is not only avoiding corporate income taxes this year, but is taking a “tax benefit” of $3 billion. According to the Times, the company's “extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”
But of course, GE is not alone. Here are 10 other big corporate tax evaders (with an assist from an MSNBC analysis of leading corporate tax-dodgers). Keep in mind that neither political party ever actually cuts spending significantly, so every dollar these companies avoid paying is one that will come out of the paychecks of working America.
CEO: Eric Schmidt (117 on Forbes list of the wealthiest with a net worth of $6.3 billion in 2010.)
2010 Pre-tax Profit: $10.8 billion
How Google avoids paying US taxes: According to MSNBC, Google reports income in overseas tax havens and then reports its costs here at home. Google also patents its products abroad, licenses its technologies from its overseas subsidiaries and then writes off the costs of the licenses.
Google fun-fact: Google rents 200 goats, complete with goatherd and a border collie, to keep the grass nicely trimmed at Google HQ. Oh, and this week Bloomberg reported that the Federal Trade Commission is considering launching a major investigation into Google's anti-competitive practices.
2. News Corp
CEO: Rupert Murdoch (Murdoch ranked 53rd on Forbes' list of highest-paid CEOs and was the 117th richest person in the world last year.)
2010 Pre-tax Profit: $3.3 billion
Taxation strategy: In 2008, the Government Accountability Office issued an analysis concluding that one of the companies with the greatest number of subsidiaries in offshore tax-havens was none other than News Corp., which then had more than 150 of them scattered across the world.
News Corp. fun-fact: Fox “News” devoted significant airtime to hyping the financial ties between Alwaleed bin Talal, a member of the Saudi royal family, and the developers of the Park 51 Muslim community center planned for downtown Manhattan. Fox implied there was something sinister about the financier, but didn't mention that he is also News Corp.'s second largest shareholder, with 7 percent of the company's stock.
CEO: W. James McNerney (According to Forbes, McNerney is the 101st most highly compensated CEO, pulling in a cool $58 million over the last five years.)
2010 Pre-tax Profit: $4.5 billion
How Boeing avoid paying US taxes: According to MSNBC, “despite a double-digit tax rate, Boeing has managed to escape paying federal taxes for the last three years thanks to a plethora of foreign subsidiaries, which act as a tax haven. According to Citizens for Tax Justice, the airplane maker paid 0.3 percent of its pre-tax income in federal income taxes in 2010.”
Boeing fun-fact: Boeing may be a defense contractor that's flush with cash, but it reportedly uses prison labor to assemble cable assemblies for the F-15 fighter. At least the jobs are in the US!
CEO: Ian Read (Read's new on the job, following the sudden departure of former CEO Jeffrey Kindler late last year.)
2010 Pre-tax Profit: $9.4 billion
How Pfizer avoids paying US taxes: Pfizer uses “transfer pricing” to record phantom profits in low-tax countries based on sales in other countries.
Pfizer fun-fact: The Wall Street Journal, in 2009, noted that “Pfizer agreed to plead guilty to a felony violation 'for misbranding Bextra with the intent to defraud or mislead.' The settlement is the largest in Justice Department history, according to theDOJ’s statement.” It paid $2.3 billion for the fraud.
CEO: Lawrence Ellison (Forbes ranks Ellison as the 6th richest man in the world, with a fortune worth $28 billion.)
2010 Pre-tax Profit: $8.2 billion
How Oracle avoids paying US taxes: Transfer pricing again, although MSNBC adds that “Oracle suffered a bit last fall when its Japanese subsidiary had to negotiate an advance agreement with tax authorities in the US and Japan so it wouldn’t get hit with transfer price taxes in Japan... Its stock closed 9 percent below the previous day’s close on the Nikkei, the Japanese stock market.
Oracle fun-fact: In 2004, then Attorney General John Ashcroft sued Oracle to block an acquisition on anti-trust grounds. Just three months after he resigned, Ashcroft opened a lobbying shop, Oracle became his biggest client and the right-wing crooner reportedly smoothed the way for its acquisition of Choicepoint, a company made infamous for its part in disenfranchising voters in the 2000 election.
6. Altria (Philip Morris)
CEO: Michael Szymanczyk (He's #176 on Forbes' list of the most highly paid CEOs, raking in $6.35 million last year.)
2010 Pre-tax Profit: $5.7 billion
How Altria avoids paying US taxes: According to MSNBC's analysis, “Between 2001 and 2003, the cigarette maker took advantage of $3.3 billion in tax breaks, which effectively cut its taxes by one-third.”
Altria fun-fact: The word “Altria” is derived from the Latin word for “high,” and was taken to distance itself from the baggage surrounding the name Phillip Morris. According to the Center for Public Integrity, Altria came in second in terms of dollars spent on lobbying between 1998-2004, showering politicians with over $100 million.
CEO: Samuel Palmisano (He also serves on Exxon Mobile's board of directors. Palmisano ranked 21st on Forbes' list of CEO pay, pulling down a tidy sum of over $25 million last year.)
2010 Pre-tax Profit: $19.7 billion
How IBM avoids paying US taxes: Over three years in the early 2000s, the company exploited “a litany of tax breaks” that allowed it to slash its taxes by 95 percent! Bet you wish you could do that.
IBM fun-fact: According to Reuters, IBM has cut 30,000 US jobs since 2003, which is good news for Indian tech workers – the company added 69,000 jobs in India over the same period.
8. Time Warner
CEO: Jeffrey Bewkes (Bewkes pulled down $48 million in pay over the past five years, which was good enough for #56 on Forbes' 2010 list of best paid CEOs.)
2010 Pre-tax Profit: $3.9 billion
How Time Warner avoids paying US taxes: According to MSNBC, “The entertainment conglomerate managed some swift accounting to use its merger with AOL in 2000 to leave it with little tax to pay. Between 2001 and 2003, Time Warner claimed tax breaks that cut its taxes by 121 percent—and allowed the company to pay nothing at all in taxes for two years.”
Time-Warner fun-fact: A Google search of “Time Warner” and “evil” nets 4.2 million results. 'Nuff said – you already know you hate them.
9. Morgan Stanley
CEO: James Gorman (After his firm played a starring role in crashing the global economy, Gorman took home a $5.7 million bonus in 2009.)
2010 Pre-tax Profit: $6.2 billion
How Morgan Stanley avoids paying US taxes: It took full advantage of offshore tax havens; then, under a 2004 law, repatriated much of that money for a super-low tax rate of just over 5 percent.
Morgan Stanley fun-fact: JPMorgan is the largest servicer of food-stamps in the U.S., offering benefit cards in 26 states. As Mary Bottari wrote for AlterNet, “The firm is paid per customer. This means that when the number of food stamp recipients goes up, so do JPMorgan profits.” She adds: “JPMorgan is taking its responsibility to keep the US unemployment rate high by offshoring the servicing of many of these contracts to India, according to ABC News.”
CEO: Steve Ballmer (With a fortune of $14.5 billion, Ballmer is the 33rd richest person, according to Forbes.)
2010 Pre-tax Profit: $25 billion.
Taxation strategy: Microsoft is a master of shifting income through various foreign countries— “to Bermuda via the Netherlands via Ireland” —in order to limit its domestic income subject to taxation. According to the blog MicrosoftTaxDodge, a carefully timed press release threatening to move the company's headquarters out of Washington state resulted in Rep. Ross Hunter, a 17-year former manager at Microsoft, pushing through “two huge gifts [for the company]: a $100 million annual tax cut and an estimated $1.25 billion in amnesty on its 13-year Nevada tax dodge.”
Microsoft fun-fact: Both US and European regulators have found Microsoft in violation of anti-trust laws – it's practically the firm's business model.