The 50 US Companies With The Most Profits Stockpiled “Overseas” To Avoid Taxes In the U.S.

…[There is a] vast difference between the much bemoaned statutory corporate income tax rate of 35%, one of the highest in the world, and the Effective Tax Rate, which is zero for some of the most profitable companies.

(How much of their profits are registered overseas? The interactive chart here shows the 50 U.S. companies with the most profits stockpiled “overseas” to avoid taxes in the U.S., while the actual money is wherever, including in US-based assets – hover over the blue bars to get the amounts).

There is a misconception about the uncanny ability of very profitable U.S. companies, like Microsoft and Apple, to park their profits overseas in order to dodge U.S. taxes: the money from these profits that are parked “overseas” isn’t actually overseas.

It is registered in accounts overseas, for example in Ireland, but is then invested in whatever assets the company chooses to invest it in, including in US Treasuries, US corporate bonds, US stocks, and other US-based investments…[The fact of the matter is that] these funds cannot…be “repatriated” because they’re already here — or wherever the company wanted to invest them.

According to a recent report by the Government Accountability Office (GOA), this and other practices give large corporations a big advantage over small businesses and individuals. Some key findings:

• In each year from 2006 to 2012, at least 67% of all active corporations had no federal income tax liability.
• Among large corporations (generally those with at least $10 million in assets), 42.3% paid no federal income tax in 2012.
• Of those large corporations whose financial statements reported a profit, 19.5% paid no federal income tax that year.
• For tax years 2008 to 2012, profitable large U.S. corporations paid, on average, U.S. federal income taxes amounting to about 14% of the pretax net income that they reported in their financial statements (for those entities included in their tax returns).

Federal tax collections from corporate income taxes are now around 2% of GDP while those from individual income taxes are over 8% of GDP and rising. I added the red arrow and label to indicate where we stand:

“Follow the munKNEE” on Facebook, on Twitter or via our FREE bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)