US companies pay more taxes abroad than here

The Financial Accounting Standards Board's recent income tax disclosure standard is revealing that many prominent U.S. multinationals are paying far more corporate taxes in other countries than at home, according to a new analysis.

The research, released earlier this month by the Financial Accountability and Corporate Transparency Coalition, found that several well-known U.S.-based companies are paying substantially more in taxes overseas while reporting relatively little taxable income in the U.S., often after shifting their profits to tax havens such as Ireland, Singapore, Bermuda and the Netherlands to lower their taxes here.

For example, according to the analysis, Boeing paid more than twice as much tax in Germany as in the U.S. PepsiCo reported less than 10% of its pre-tax income domestically even though over half of its revenue was generated in the U.S. Tesla paid approximately $28 million to the U.S. government, about 27 times less than the $751 million it paid to China. GE Vernova reported nearly half of its revenue in the U.S. but less than 3% of its pre-tax profits domestically.

The disclosures were available for the first time thanks to FASB's income tax disclosure standard, which was released in late 2023 and took effect for public companies last year. 

"I think the disclosures have proven really useful," said FACT Coalition policy officer Thomas Georges. "We're seeing with many companies really low cash taxes paid in the United States. That really just serves as evidence of how generous recent U.S. corporate tax policy has been in successive tax cuts in 2017 and 2025. Then what we're also seeing in the new country-by-country disclosure on tax effects is that a lot of really iconic U.S. brands and companies are still registering big savings in tax haven jurisdictions. We're seeing the usual suspects of Bermuda, the British Virgin Islands, Ireland, Singapore, Switzerland. These sorts of jurisdictions are showing up again and again. What that's really reinforcing to us is that current U.S. anti-abuse rules and treatment of foreign corporate profits still don't provide enough of a deterrent to the continued use of tax havens."

Last year, House Republicans released a spending proposal that threatened to withhold funding from FASB unless it withdrew the standard, but so far, FASB has managed to dodge the funding threat. That provision was included in the House version of the draft legislation, but was ultimately removed in the version of the spending bill that was finally adopted and signed into law. 

"In our view, it's unfortunate to see this politicization of an independent standard-setter," said FACT Coalition policy director Zorka Milin. "Now that these disclosures are out, the arguments and concerns about how this kind of reporting would supposedly be way too onerous and expensive for companies, it's all a done deal now, so I think these complaints fall away now. We are seeing just how useful this information can be. We're not the only ones looking at this. We're also aware of some investors and investment analysts who are also watching the information. It's definitely valuable for a wide range of folks who are interested in corporate taxes."

It's possible that some companies are still able to deduct the taxes they pay abroad from the taxes they pay in the U.S. by claiming them as foreign tax credits.

"The reports don't give us that level of detail in terms of the FTCs that companies may have claimed," said Milin. "Those FTC rules are devilishly complex, so it's hard to know what the cost is in terms of the FTCs that companies are claiming for foreign taxes and the tax payments they're making. We just don't have information on that."

Last month, the Organization for Economic Cooperation and Development effectively exempted many U.S. companies from the Pillar Two rules imposing a 15% global minimum tax on large companies after threats by the Trump administration to impose a so-called "revenge tax" on them in the One Big Beautiful Bill Act.

"These disclosures don't change the rules, and we have a large number of other jurisdictions, close to 60 other countries, that have adopted the globally agreed minimum tax under Pillar Two," said Milin. "That's starting to show up in the data, where a number of companies are making larger tax payments as a result of these new rules. In our view, it really underscores that the U.S. is losing out by not reforming and improving our own tax rules to claim some of the tax revenue for the U.S."

The new reports indicate that the OECD's global minimum tax rules seem to be indirectly generating more tax revenue for other countries, but not the U.S.

"What we're actually seeing in the data from these new reports is that the new OECD agreements, safe harbors and what not that provide in some circumstances preferential treatment for U.S. companies, that deal and that guidance that recently came out only exempt U.S. companies from certain taxes under the global minimum tax," said Georges. "We're seeing companies report that they're paying more tax now because of the global minimum tax under the domestic minimum taxes being implemented by countries around the globe, not under the elements of Pillar Two that the U.S. companies are now exempt from. We're very happy to see that even with a little bit of setback to the overall global minimum tax, a lot of companies are still having to pay more. We just wish the U.S. would tighten our rules as well and conform with that global minimum standard."

Some countries also impose digital service taxes on U.S. multinational technology giants, but those taxes wouldn't show up in the FASB disclosures, Milin noted, because they're not income taxes. The Trump administration recently pressured Canada to drop its DST to avoid the threat of higher tariffs. 

The Biden administration imposed a 15% alternative minimum tax on billion-dollar companies under the Inflation Reduction Act of 2022, but the Trump administration has been issuing tax regulations and guidance from the Treasury Department providing ways for companies to avoid those taxes. Nevertheless, some of the corporate alternative minimum taxes are also showing up in the FASB disclosures.

"We are seeing some companies disclosing that they are now CAMT taxpayers," said Georges. "They are now subject to that minimum tax. Mostly how we're seeing that show up right now is companies reporting big tax hits, not on a cash basis. They're not actually paying the additional tax at this time. They're mostly recording big hits to the realizability of their deferred tax assets. They have a bunch of tax assets sitting around from previous years that they think they'll no longer be able to reasonably use, given that they're now in the scope of the CAMT."

The FASB income tax standard seems to be providing useful information for investors about how much companies are paying in other countries versus the U.S.

"In particular, the information on how much these companies' tax rates are being reduced by jurisdictions that have traditionally been thought of as tax havens, that's all information that poses potentially material risk for investors in terms of not just tax enforcement issues, but potential future tax reforms, and the implementation of the global minimum tax in countries around the globe," said Georges. "A lot of these tax haven jurisdictions now have domestic top-up taxes. Understanding how much a company's taxes are potentially exposed to these changes is highly material for investors, but we didn't have anything like this information just last year before the standard went into effect."

The new disclosures may influence the tax strategies pursued by companies and cause them to change their practices in terms of where they pay taxes or how they shift their profits around the world.

"That's the big question, how it will impact corporate behavior and corporate tax planning," said Milin. "It's a bit too early to say, but regardless of that, it has an impact on laying bare the impacts of our current tax policy. In addition to that research, it's also helpful in informing tax policy debates. That's another value in these disclosures that we see."

Further disclosures are anticipated in other countries besides the U.S.

"We're expecting another round of new disclosures later this year, not just as companies keep releasing their 10-Ks, but both the European Union and Australian country-by-country reporting initiatives are going to go into effect at the end of June," said Georges. "We're going to see some additional information about some of these same companies, and also other global companies that are doing business in the EU and Australia. It will be interesting to see where major gaps in transparency still exist once we've seen the first round of disclosures and the extent to which they're comparable and complementary. That's something I'd keep an eye on, the continuing trend throughout the year of disclosures on tax."

Major American companies, including Microsoft and Apple, are expected to begin disclosing more comprehensive information about their operations under those laws. 

"We have reports under the EU law and the Australian law, which will cover a lot of major American corporations," said Milin. "That information will start coming in later this year, sometime in the summer and beyond, so we'll be watching out for that."