As Americans prepare to file their tax returns this April, they may be surprised to learn that they're paying higher rates than some of the largest companies in the land.
On Feb. 3, President George W. Bush proposed a US$2.23 trillion budget that would leave the US with a record US$307 billion deficit. Given that gap, Federal Reserve Chairman Alan Greenspan has urged Congress to restrain spending and has questioned the president's proposal for US$690 million in new tax cuts.
"There should be little disagreement about the need to reestablish budget discipline," Greenspan told the House Financial Services Committee on Feb. 10.
Some lawmakers say the US needs to reestablish corporate tax discipline too. Enron Corp has avoided taxes in recent years with "incredibly complicated transactions," according to a report made public by the Senate Finance Committee on Feb. 13. The company set up 692 units in the Cayman Islands as part of a strategy to avoid taxes. The study called for new penalties to limit tax shelters.
"We are going to have the veil torn off the world of tax shelters and the world of manipulation of accounting," said Senator Charles Grassley, chairman of the Senate Finance Committee, as congressional investigators released the report this month.
Many US companies regularly -- and legally -- minimize their income taxes. In 2001, eight of the 30 companies in the Dow Jones Industrial Average, among them General Electric Co and Microsoft Corp, paid taxes amounting to less than 20 percent of their operating profit, according to Bloomberg data. The top 2001 tax rate for individuals was 39.1 percent.
Companies use a variety of methods to reduce taxes, ranging from credits for research to breaks on employee stock options.
When employees exercise their options, companies can take a tax deduction for the difference between what the employees pay for the stock and its market price. Such deductions cut Microsoft's tax bill by US$9.2 billion from 2000 to last year, says spokeswoman Caroline Boren.
``This is a standard deduction,'' Boren says.
General Electric has reduced its bill through tax-advantaged transactions done by its leasing unit, General Electric Capital Services, according to a 2000 study by the Washington-based Institute of Taxation and Economic Policy. From 1996 to 1998, GE received US$6.9 billion in tax breaks -- more than any other US company, according to the study.
In its 10-K filing with the US Securities and Exchange Commission, GE said its effective tax rate in 2001 was 27.8 percent. That's the rate at which GE was taxed on earnings after the company covered its costs and excluded one-time profits or losses from such variables as exchange rates. GE paid US$1.49 billion in taxes that year, the equivalent of 7.4 percent of its operating profit.
GE does business in more than 100 countries and has benefited from low tax rates outside the US, says spokesman David Frail.
The US has the fourth-highest corporate income tax rate in the 30-nation OECD, according to a January 2002 study by accounting firm KPMG International.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College