US Corporate Giants Do Not Pay Full Tax Rate

July 2, 2013 Taxation in USA

Government Accountability OfficeWASHINGTON D.C. – Tax breaks and allowances are drastically lowering the effective tax rate paid by the biggest businesses in the USA, and the average large corporation now pays a tax rate of as low as 12.6 percent.

A new report released by the US Government Accountability Office (GAO) on July 1st has shown that in recent years large US based businesses (with total assets exceeding USD 10 million) have been paying income tax at a rate of only a little bit more than a third of the federal corporate income tax rate of 35 percent.

According to the GAO, over the 2010 fiscal year, the latest year for which the Office could obtain the data necessary for its analysis, the effective federal tax rate paid out by the businesses was approximately 12.6 percent, and even if the calculation includes all the additional state, local and foreign taxes paid, the overall tax rate rose to only 17.4 percent.

The authors of the report suggested that such a low effective tax rate is a direct result of businesses utilizing all available tax deferrals, allowances, credits and incentives currently, and also making use of tax planning tactics such as aggressive transfer pricing policies. .

Commenting on the report, Senator Carl Levin, who originally requested for the study to be conducted, said that the results clearly show that the US urgently needs to conduct an extensive overhaul of the tax code, removing inefficient tax breaks and to lowering headline tax rates for all taxpayers.

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