Every year the media is plastered with reports about the disparity in the amounts of money companies pay in taxes. Recently, WalletHub.com has weighed in on the subject with a report, noting that "With taxes and income inequality taking center stage in the recent presidential debates, the personal finance website WalletHub today released its latest S&P 100 Tax Rates report. This report provides an in-depth analysis of the 2014 rates at which S&P 100 companies -- collectively worth more than $11 trillion as of Sept. 30 -- are taxed at the state, federal and international levels."
With tens of thousands of pages in the US Tax code alone, determining what company pays what amount can be rather confusing. When you add multiple layers of taxes -- city, county, state, and (for most of these companies) international -- it becomes the fiduciary equivalent of pandemonium. Yet, somehow many companies mitigate this tax burden through political influence or due to excellent tax expertise.
The following is a list of the highest and lowest paying businesses when it comes to total taxes on all layers of government, according to the WalletHub report.
Companies Paying the Highest Taxes
1Anadarko Petroleum
2Occidental Petroleum
3Devon Energy
4Citigroup
5Walgreens Boots Alliance
6Unitedhealth Group
7Exxon Mobil
8Facebook
9CVS Caremark
10ConocoPhillips
Companies Paying the Lowest Taxes
1Morgan Stanley
2Amgen
3General Electric
4General Motors
5Mondelez International
6Celgene
7QUALCOMM
8Bristol-Myers Squibb
9Time Warner
10Medtronic
According to the report, S&P 100 companies pay approximately 24 percent lower rates on international taxes than U.S. taxes. This is among the reason some of the largest businesses in the US are considering relocating to other parts of the world and taking many jobs with them. Many countries around the world recognize the power of lower tax rates in making a country more competitive in attracting business.
Three companies on the lowest paying list; Morgan Stanley, General Motors, and General Electric actually pay a "negative" tax rate in the US. These businesses are essentially being subsidized by the US tax code.
The story behind the disparity can be attributed to several reasons.
"Regulatory capture" is often a factor in which mega businesses use their considerable lobbying influence and political campaign finance to get tax and other laws created both in the US and around the world that favors them. For example, many of the businesses that are among the lowest paying in taxes enjoy such a benefit because they have government recognized "green initiatives" that countries want to reward.
Other companies, such as General Electric, are legendary in their efforts at mitigating tax expenses. There is an enormous cost in time and money for such tax fighting actions, but businesses like GE have enjoyed the rewards. It costs a significant amount of money and human resources to prepare a 5,000 page tax return, as GE has done in the past, but obviously that is better to them than paying governments.
Meanwhile some countries around the world have a particular interest in attracting companies in certain verticals. Internationally, tech companies, including Apple, Cisco Systems and Google, have enjoyed special tax incentives. These businesses are still paying more than 25 percent lower rates abroad, continuing the trend from 2013.
There are certain things each of these companies have in common. They are all extremely large and influential. Most spend an enormous amount of time and money in consultants and professionals to mitigate the costs of taxes. Furthermore, most of these companies have significant political influence that makes it possible to save a fortune in taxes. The lessons we learn is that crony capitalism is alive and well and it can be found all over the world, and even in various tax codes.