Businesses Find Ways to Avoid Corporate Taxes, but a Fix Seems Unlikely
A pharmaceutical company moved its headquarters to Ireland, sharply reducing its tax rate. A billboard company reclassified itself as a real estate concern, meaning it will no longer pay corporate taxes. And a big oil producer split itself in two, cleaving off a multibillion-dollar division that now operates tax-free.
Across corporate America, companies large and small are finding new ways to address one of the business world’s oldest irritations: paying taxes.
By exploiting existing loopholes and devising new ones, some of the country’s best-known companies are making it harder than ever for the federal government to replenish its already depleted coffers.
Lawmakers in Washington are calling for an overhaul of the corporate tax code. Upon becoming chairman of the Senate Finance Committee this year, Senator Ron Wyden, Democrat of Oregon, said it was time to revamp the “dysfunctional, rotting mess of a carcass that we call the tax code.”
While officials may not be in the mood to cooperate, they are taking notice of recent developments. Three tax-avoidance tactics in particular have grabbed the attention of lawmakers and the White House, though the root of the problem runs much deeper.
Most prominently, the number of inversions is at an all-time high, fueled by a rush of health care companies striking deals for overseas rivals.
Corporate advisers say that companies are pursuing these structures because, in the face of slow organic growth, executives are looking for additional profits wherever they can find them.
“It’s self-help tax reform,” said Kyle E. Pomerleau, an economist at the Tax Foundation. “If Congress is not willing to reform the corporate tax code, companies are going to do it for themselves.”
Over the years, a growing portion of the United States economy has shifted away from traditional corporations and into lower-taxed structures like partnerships and S-corporations, which are exempt from paying income taxes. This has put a growing swath of the economy beyond the reach of the I.R.S.
And for those traditional corporations that are subject to the United States corporate tax rate, which at 35% is the highest in the world, there are myriad ways to avoid paying anything close to that.
Source: NYT
