The role of corporate taxation has always been a contentious political and economic issue, and with a pending U.S. election it has proven to be a polarizing topic in recent debates.
A recent report by WalletHub looked at the 2014 tax rates for S&P 100 companies, and found a wide differential between the highest and lowest tax rates paid by companies.
WalletHub, a personal finance website, creates the report on an annual basis by analyzing annual reports for the S&P 100 to determine rates paid at the state, federal, and international levels.
“A lot of people think of corporate tax as another type of consumer tax, like taxing people twice,” said Jill Gonzalez, analyst at WalletHub. We wanted to see the relationship there and what companies are doing to benefit their consumers and their investors.”
One of the report’s key findings was that technology companies like Apple, Cisco Systems and Google are still paying more than 25 per cent lower rates abroad, continuing a previous trend from 2013.
“The one method that a lot of multinational corporations are using to pay lower, total taxes is offshore transfer payments,” added Ms. Gonzalez. “That’s done especially by these tech companies by creating foreign subsidiaries to make raw materials or parts in countries with low tax rates.”
WalletHub, launched by Evolution Finance in 2012, provides resources for consumers to search and compare financial products and organizations in order to make more informed decisions. The S&P 100 Tax Rate Report was developed as a way to advance the discussion around corporate taxation and whether companies should bear the burden.
It’s no secret that the U.S. has the highest corporate taxation rate among developed nations, so it should come as no surprise that companies seek tax havens abroad in countries like Ireland where the combined corporate tax rate is 12.5 per cent compared to a relatively staggering 39.1 per cent in the United States.
Looking at the bottom of the list, Morgan Stanley ranked as the company paying the lowest taxes, with a rate of -2.5 percent, due to unrealized losses carried forward from prior years and paid out in 2014. The financial giant is the only company on the list paying an overall negative tax rate.
“I think companies are paying more than their fair share of taxes,” added Ms. Gonzalez. “I don’t consider tax inversion deals as unpatriotic. At the end of the day, these companies want to be profitable for shareholders, many of which are U.S. consumers.”
Unpatriotic or not, the discussion around corporate taxation is bound to rage on as companies continue to search for loopholes, with consumers and investors standing to gain – or lose.