Tax Watchdog Claims 15 Companies Avoided $25 Billion

An Institute on Taxation and Economic Policy (ITEP) report puts forward a damning claim. The report states about 15 companies registered in the United States avoided a whopping $25 billion in taxes in their combined profits in 2017. The list of such tax avoidance companies include prominent names like Amazon.com, Inc. (NASDAQ: AMZN), Prudential Financial Inc (NYSE: PRU), and Duke Energy Corp (NYSE: DUK).

Using legal loopholes

Amazon enjoyed a federal rebate of $137 million on its $5.4 billion American profits. The effective tax rate is thus negative 2.5 percent. The company utilized a tax break which permits companies to write off executive stock option values. Similarly, as per ITEP, Duke Energy got a $247 million rebate. The Charlotte, North Carolina-based company made $4.2 billion profits through accelerated depreciation on its capital investments. Money was also saved through tax credits based on renewable energy production. The federal tax rate was thus effectively negative 5.9 percent. Amazon officials, when contacted, declined to comment on the issue.

The Trump administration, as per the watchdog, has not made much progress to curb such practices. The ITEP report stated that the new United States tax regime, responsible for cutting the rates of income tax from the previous 35 percent to the now 21 percent applicable from January, will in all probability permit companies to avoid large amounts of tax.

Gaming the system

The ITEP report shows a volume of data which displayed the technique by which how massively profitable American companies regularly lowered tax bills. This started much before the Trump administration overhauled the tax system and brought in new laws in December. According to the tax watchdog, the 15 companies in question in 2017 made profits of nearly $24.5 billion. However, they managed to obtain rebates on their amounts. The rebates amounted to $1.4 billion for combined tax rate. The latter in percentage terms was found to be minus 5.6 percent. The ITEP made such discoveries after analyzing all disclosures made on the corporate income tax statements.

According to the ITEP, companies employed a number of tax breaks to slash their respective tax bills. The entity pointed out that the companies intentionally made vague disclosures so that it will be hard to catch the method used by them to avoid their tax bills. Reaction from the companies named in the ITBP report was of outright denial. A Duke Energy spokesperson said the report is not only misleading but also a flawed one.

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