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1 Scott A. Hodge, U.S. Multinationals Paid $100 Billion in Foreign Income Taxes according to Most Recent IRS Data 1 (2011)

handle is hein.taxfoundation/ffcghxz0001 and id is 1 raw text is: Ap ril26, 2011 No. 267 U.S. Multinationals Paid $100 Billion in Foreign Income Taxes According to Most Recent IRS Data By ScottA. Hodge In recent months, a number of press accounts have mentioned the amount of taxes paid by U.S. multinational firms on their foreign income. Some of the more sensational articles would have readers believe that U.S. companies pay little or no tax on their foreign earnings.! Unfortunately, such stories are either based upon a misunderstanding of how U.S. international tax rules work, or are simply careless when portraying the way U.S. companies pay taxes on foreign profits. The U.S. has a complicated worldwide system of taxation that requires American businesses to pay the 35 percent federal corporate tax rate on their income no matter where it is earned - domestically or abroad. When it comes to foreign profits, companies do pay income taxes--not once2, but twice .2 Figure 1: Foreign Taxable Earnings and Taxes Paid by U.S. Companies 1992 to 2007 First, companies pay income taxes to the country in which their profits were earned, and then they pay additional U.S. taxes on any profits they return to this country. For example, if a subsidiary of a U.S. firm earns $100 in profits in England, it pays the British income tax rate of 26 percent, or $26. Since our system gives companies a credit for the taxes they pay to other countries, the additional U.S. tax the firm is required to pay is equal to the difference between the U.S. rate of 35 percent and the 26 percent British rate- or $9. Between the two nations, the U.S. firm will pay a total of 35 percent in taxes on those foreign profits. However, American firms can delay paying $500 $450 $400 $350 $300 $250 $200 $150 $100 Billions of 2011 Dollars Taxable Income Foreign Taxes Paid $50 1992 1993 19941995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: IRS Form 1118 iJesse Drucker, Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes, Bloomberg, October 21, 2010. David Kocieniewski, G.E.'s Strategies Let it Avoid Taxes Altogether, New York Times, March 24, 2011. 2 The same rules apply to individuals, as well as non-corporate businesses such as S-corporations, LLCs, and partnerships. )ATION

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