Further to the recent reports of corporations that are avoiding taxes, tax attorney Rob Wood has written an article for Forbes entitled “Forget Inversions, These 20 Huge, Profitable Companies Already Pay Zero Tax.” He discusses his article in this report.
Wood says that there isn’t one single factor that makes this possible. Especially considering the size and complexity of the tax code. On factor to consider is that taxes are levied on net profits, not on gross income. A corporation with a great many deductions—actual payments and other things, like depreciation—may end up with no net taxable income. Another avoidance technique, used by Apple, is to maintain offshore units that have no tax home, creating so-called “stateless income.”
Corporate transactions like inversions—much discussed in the last few months—are one type of transaction structured to avoid future taxes. Wood says that all of these things invite a discussion of the questions, “What kinds of entities should be paying taxes?” and “How many layers of taxation do we want?” There is a debate of long-standing in this country whether dividends should be taxed, given that corporate profits have already been taxed.
Wood suggests that, on one level, all of these things are shocking. The discussions will surely continue. The Taxation Law Channel discussed corporate inversions in this report.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.