Corporate taxes in America are defined as taxes imposed on the income of corporations, otherwise known as company taxes. Corporations, like individuals, are responsible for filing their tax returns and some corporations might even be subject to foreign income taxes. America’s corporate income tax is 35%, therefore making it difficult for solely US based companies to produce large profit due to the high tax rate. In order to maximize profit many large corporations use swift income maneuvering to avoid paying this tax rate and other foreign tax rates; a prime example would be Google Inc. and General Electric.
Google is known as one of the most effective in tax evasion or “income shifting.” From 2007-2010 Google has cut its taxes by 3.1 billion dollars; and in order to accomplish this feat it has been recorded that Google has decreased its foreign tax rate to a mere 2.4% while the average foreign tax rate is 20%. So how do they do it? Well, Google and other major corporations use the aforementioned “income shifting.” Google strategy involves moving their profits from Ireland to the Netherlands to Bermuda. Google takes advantage of corporate law in Irish to move their profits into subsidiaries and move them out of those subsidiaries. The profits ultimately reach areas that impose either a very small corporate tax or none at all. Thus, in 2009 Google has increased their profit by almost 26%.
Another prime example is General Electric. Unbelievably, General Electric pays very little US taxes and in 2010 actually paid no US federal taxes but made 14.2 billion dollars in profit. How do they do this? Well, most of their profit comes offshore, and increased lobbying and maneuvering has allowed them to obtain many tax benefits; in fact in 2010 GE obtained a 3.2 billion dollar tax benefit. This has caused the Obama administration to advocate for better corporate tax regulation so companies cant take advantage of the loopholes. GE representatives state that their zero tax return is because of financial hardships on GE subsidiaries, such as GE capital.