Approximately two-thirds of U.S. companies and foreign companies doing business in the U.S. paid no federal income taxes between 1998 and 2005, according to a new
The Government Accountability Office found that over 38,000 foreign companies had zero tax liability in 2005, as did 1.2 million U.S. businesses. That lack of tax liability came despite a combined $2.5 trillion in revenue for the companies.
Many of the companies are not reporting U.S. income taxes for a variety of reasons, including operating losses, tax credits and transfer-pricing abuses. The GAO set out to compare the reported tax liabilities of foreign- and U.S.-controlled corporations to see the effect of transfer pricing. Foreign-controlled domestic corporations showed lower tax liabilities than U.S.-controlled corporations by most measures, the GAO found, and a greater percentage of large foreign-controlled domestic corporations reported no tax liability in a given year from 1998 through 2005.
In related news, New York City Mayor Michael Bloomberg said at a news conference Monday that many Wall Street financial and banking firms will not be paying New York state and city taxes either as a result of writedowns in the financial industry. "It will be a number of years before Wall Street starts paying taxes again," said Bloomberg. "They will carry forward all of those losses."
