The Corporate Tax Avoidance Game

The U.S. Congress

Well, the Congress is finally back from their August recess. They must be exhausted from telling all those lies to their constituents back in their home districts. They will have a chance to rest up in Washington before they rush home to try to save their seats in the Congress in the coming election.

Both political parties constantly accuse each other of being unfair to middle class taxpayers. Little is ever said in the Congress about corporate tax avoidance. While the Congress was away, the Government Accountability Office (GAO) released the results of a study that were reported in both The New York Times and Washington Post. The GAO study found that from 1998 through 2005, two out of every three U.S. corporations paid NO FEDERAL INCOME TAXES. the study included 1.3 million corporations with collective sales of 2.5 trillion dollars. This same study also found that 68% of foreign corporations doing business in the U.S. pay no federal income taxes. The corporations use various tax loopholes including “transfer pricing” to avoid paying U.S. taxes. Loosely defined, transfer pricing is the practice of transferring U.S. sales revenues to small subsidiaries located outside of the United States. This practice results in the loss of hundreds of billions of dollars of U.S. taxes payments year after year after year. Corporate avoidance of income tax keeps the tax burden squarely on the shoulders of middle class taxpayers. It is the middle class that pays the bulk of federal income taxes each year. Read about the study at the following websites.

http://www.nytimes.com/2008/08/13/business/13tax.html?em

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/11/AR2008081102324.html

http://www.informationclearinghouse.info/article15704.htm

While we are on the subject of tax avoidance, the Boston Globe reported that KBR, by far the largest Department of Defense (DOD) contractor in Iraq avoided hundreds of millions of dollars of Social Security and Medicare taxes by hiring workers through two “shell companies” based in the Cayman Islands. It was reported that the DOD was fully aware of the practice and did nothing about it. Until last year, KBR was a subsidiary of Halliburton . Read about this scam at the website below.

http://www.boston.com/news/world/articles/2008/03/06/top_iraq_contractor_skirts_us_taxes_offshore/

Don’t these stories make you feel good about the Congress; and those who are supposed to be representing you in the Congress?

They’re

Back.

Wednesday, September 10, 2008

The Corporate Tax Avoidance Game