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Corporate Citizen 2011 Tax Dodging Hall of Shame: Google, Exxon, News Corp.

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I am heading a little off topic today. This is about flag waving hypocrisy:

But when the tax man comes to the door,

Lord, the house looks like a rummage sale.

.

Patriotism in the United States can be measured in many ways. One important measurement is whether a major company contributes its fair share of taxes. It’s not about military service when you talk about a corporation. It’s not even just about charitable giving. It’s fine to want lower tax rates, and this is a common theme in politics at the present time. However, isn’t it just downright unpatriotic to avoid paying any share of U.S. taxes? Let’s face it, without some taxes there’s no federal funding for interstate highways, our military, airports, Medicare or Social Security. That leads me to the corporate citizen top three 2011 Hall of Shame rankings.

Back in the '60s, John Fogerty, one of the great American rock songwriters, wrote a scathing rock anthem attacking the hypocrisy of the haves — the “fortunate sons” — versus the have-nots. Fogerty’s sarcasm-soaked words ring so true today:

Some folks are born silver spoon in hand
Lord, don't they help themselves, oh
But when the taxman comes to the door
Lord, the house looks like a rummage sale

— "Fortunate Son"

The same corporate citizens that wave the flag of USA patriotism aren’t patriotic corporate citizens when they use every available method to avoid paying any fair share of U.S. taxes by exporting jobs. Tax avoiding strategies include setting up subsidiaries to offload tax responsibility and juggling their financial books and records to show as little profit as possible.

2011 Hall of Shame

1. Google

Yes, your favorite search engine tops the 2011 shame list even though one of its mission statements is “Don’t be evil.” While the young founders of Google began as outsiders swimming upstream against the corporate trappings of their elders, they eventually lost sight of their principles. As evidence of their hypocrisy, Google exported more than 2,000 jobs from the United States to Dublin, Ireland, and now report 88 percent of their $12.5 billion in sales as being generated by its overseas division. Google is also using the tax haven of Bermuda to bank tons of its profits. Guess how these financial moves benefit the company? Google had an effective tax rate of 2.4 percent for its 2009 fiscal year. It achieved this miniscule tax bill by juggling its books and maintaining the Dublin office to keep its tax liability abroad. According to an article in Bloomberg Businessweek, the Google corporate juggling is legal, and many other companies do the same type of tax dodging.

Well isn’t that being a great patriotic corporate citizen, Google? I have read a number of stories about Google’s green technology efforts, and there are many good deeds this company is doing. Still, Google takes the honors in my Hall of Shame because it has stooped to the level of the standard old corporate dodge of the monopolistic money barons of yesteryear by outsourcing jobs and juggling its financial books to screw the USA. Google is an American company as homegrown as apple pie except when it comes to paying a fair share of taxes. This is exactly what I call waving the flag while screwing all of us left in the United States to pay a fair share when Google won’t.

2. News Corporation (Wall Street Journal, FoxNews and other major companies; principal owner, Rupert Murdoch)

While FoxNews envelopes itself in patriotic news stories, its parent company ,News Corporation, maintains a whopping 136 subsidiaries based in nations identified as international tax havens, including 20th Century Fox Films, S.A. which is located in Panama. Panama imposes no taxes and maintains the strictest bank secrecy laws in the world. As a matter of fact, the Huffington Post reported that News Corp lobbied in favor of a new Panama-U.S. free trade pact, and the Wall Street Journal and FoxNews reported extensively in favor of the commercial treaty. What the news outlets didn’t disclose was that many News Corp subsidiaries stood to gain substantially by Panama retaining the strict tax haven laws that prevented the U.S. government from looking closer into just how much money News Corp and other Panama-based tax haven subsidiaries were sheltering against U.S. taxes. True, News Corp operates just one subsidiary in Panama and has 16 in the Cayman Islands and 26 in the British Virgin Islands. What we do know from SCC filings is that News Corp had $8.6 billion in undistributed foreign earnings that it is continuing to stash outside the United States indefinitely. Between 2003 and 2006 News Corp paid a federal tax rate averaging about 5 percent, and the average tax rate went up to 15 percent in several other years and actually was as high as 25 percent in 2011. However, one has a very hard time evaluating a 25 percent tax rate when the millions in profits supposedly generated outside the United States by subsidiary companies cannot be properly evaluated. Yes, News Corp. and its media subsidiaries in the United States are red white and blue flag wavers until it comes time to pay the U.S. taxman, as Fogerty sang in "Fortunate Son." Hey, FoxNews, we need to collect some taxes to fund the U.S. military that you are constantly applauding.

3. Exxon Mobil

On $19 billion in profits in 2009, Exxon Mobil paid no federal income tax and actually received a $156 million rebate from the friendly IRS. The number of tax breaks, special reduced tax rates and other benefits given to large oil companies for virtually any research and development is well known. But where would Exxon Mobil be without the largess of our United States propping up the company in the worlds of global eco-politics and the global market influenced by events in post-Saddam Iraq?

On the one hand, Exxon Mobil pays almost no tax on its U.S. earnings. At the same time, if it wasn’t for the U.S. government's decision to invade occupy Iraq, would Exxon Mobil have signed a deal with the semiautonomous Kurdish government, a deal which has remained quietly under the radar of major news outlets? Exxon Mobil, along with several other major companies, has signed contracts with Kurd officials to exploit petroleum resources in Northern Iraq. And the Kurds are engaged in a number of feuds with the coalition Iraqi government propped up by U.S. economic investment and infrastructure. Supposedly, Kurdistan is sitting on one of the world’s undeveloped largest oil fields, and Exxon Mobil has deals dating back to 2010 with Iraq’s central government, and now with the Kurds. Billions in profits are riding on these deals. What does Exxon Mobil do to show its great respect for the United States? You guessed it — avoid paying any U.S. taxes.

Clearly, being patriotic does not involve shipping U.S. jobs overseas, juggling financial books and setting up subsidiaries for the sole purpose of screwing the U.S. government out of tax dollars. Even if doing so would mean paying higher taxes, wouldn’t corporations better show their patriotism by keeping their subsidiaries in the United States?

Freedom to profit and a free press are among the intangible attractions that draw people and investments from the rest of the world to the United Sates. Wouldn’t it be fantastic if we passed laws that required all officers and board members of U.S. companies that maintain foreign subsidiaries in tax haven nations to forfeit their U.S. citizenship, or better yet limit their total days per year in the United States to some ridiculous number like 14 days, If we can’t make them pay a fair share? Let’s boot them out of the country except for brief visits.

RNS

About the Editors: The Shapiro, Lewis & Appleton personal injury law firm, which has offices in Virginia (VA) and North Carolina (NC), edits the injury law blogs Virginia Beach Injuryboard, Norfolk Injuryboard and Northeast North Carolina Injuryboard as pro bono services.

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  1. Kevin Duffan says:
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    I read an article a couple of months back on http://www.marketwatch.com that highlighted the creative tax write-offs that several major US corporations were able to come up with, lowering their effective tax rate to 0% in some cases despite raking in 8-figure profits. Manipulation of the tax code is the American way apparently, and a surprising number of people think there’s nothing wrong with that. There’s a difference between socialism and being a good citizen. A corporation can (and should) pay its fair share without this being a socialist country, despite what the far-right would have us believe. As Elizabeth Warren said, “there is nobody in this country that got rich on his own — nobody.” It is just flat out unfair that the average US citizen would ever have to pay a higher effective tax rate than a multi-billion dollar company simply because they haven’t perverted the US tax code.

    Good article, injury related or not.