Wednesday, August 13, 2008

Many corporations don't pay taxes, government report finds

Almost one-fourth of large corporations don't pay federal income taxes in a given year and roughly 60 percent of all corporations studied reported no federal income-tax liability, according to a study by the U.S. General Accounting Office.

The report, requested by the U.S. Senate Finance Committee, is entitled, "U.S. Multinational Corporations: Effective Tax Rates Are Correlated with Where Income Is Reported."

"The average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent," according to the GAO.

"This is a reminder that the reporting is a broken system as far as corporations are reporting one set to the tax authorities and another to the capital markets," Mihir Desai, a Harvard Business School professor, told The Wall Street Journal.