How Much Do U.S. Multinational Corporations Pay in Foreign Income Taxes?
Multinationals reported paying more than $128 billion in foreign income taxes in 2010, prior to paying taxes in the U.S.
The question of how much multinational corporations pay in taxes has been a popular topic in the news for several years. Many of the more sensational stories lead people to believe that U.S. companies pay little or nothing in taxes on their foreign earnings. However, according to a new study from the nonpartisan Tax Foundation, IRS data shows that U.S. multinational corporations reported paying more than $128 billion in corporate taxes to foreign countries on $470 billion of taxable income in 2010—an effective rate of 27.2 percent before also paying U.S. taxes.
“While it is undoubtedly true that U.S. multinational firms use numerous tax planning techniques to minimize the taxes they pay on their foreign earnings, IRS data dispels the narrative that they pay little to no taxes on foreign income,” said Tax Foundation Economist Kyle Pomerleau.
Many of the claims about corporate tax avoidance stem from a misunderstanding of how U.S. international tax rules work. Those who criticize U.S. companies for “avoiding” taxes on their foreign earnings need to be more careful with their language and acknowledge that our worldwide tax system requires U.S. firms to pay taxes twice on their foreign profits, once to the host country and a second time to the IRS. Any discussion about reforming the corporate tax code must keep these facts in mind.
SOURCE: Tax Foundation