Among foreign corporations, a slightly higher
percentage, 68%, did not pay taxes during the period covered — compared with 66%
for United States corporations. Even with these numbers, corporate tax receipts
have risen sharply as a percentage of federal revenue in recent years.
The GAO study was done at the request of two
Democratic Senators, Carl Levin of Michigan and Byron L. Dorgan of North Dakota.
In recent years, Senator Levin has held investigations on tax evasion and urged
officials and regulators to examine whether corporations were abusing tax laws
by shifting income earned in higher-tax jurisdictions, like the United States,
to overseas subsidiaries in low-tax jurisdictions.
Senator Levin said in written remarks that “this
report makes clear that too many corporations are using tax trickery to send
their profits overseas and avoid paying their fair share in the United States.”
But the GAO said that it did not have enough data to address the role of what
some policy experts say is a crucial factor in profits sent overseas.
That factor, known as transfer pricing, involves
corporations charging their overseas subsidiaries lower prices for goods and
services, a common move that lowers a corporation’s tax bill. A number of
corporations are in transfer-pricing disputes with the Internal Revenue Service.
Either way, the nearly 1,000 largest United States
corporations were more likely than smaller ones to pay taxes.
In 2005, one in four large United States
corporations paid no taxes on revenue of $1.1 trillion, compared with 66% in the
overall pool. Large corporations are those with at least $ 250 million in assets
or annual sales of at least $ 50 million.
At a basic corporate tax rate of 35%, all the
corporations covered in the study in theory owed $ 875 billion in federal income
taxes. But because the tax code allows corporations to claim legally an array of
deductions, write-offs, operating losses and tax credits, the actual taxes paid
were much lower.
Joshua Barro, a staff economist at the Tax
Foundation, a conservative research group, said that the largest corporations
represented only 1% of the total number of corporations, but more than 90% of
all corporate assets.
