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 report.

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."

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