Industry News: How Much Do Corporations Pay in Taxes?

 How much do corporations pay in taxes to the United States government each year?  Even among financial professionals, the answer may be a mystery.  According to a recent study released by the U.S. Government Accountability Office (GAO), many profitable companies pay less than half the statutory maximum tax rate of 35 percent.

Companies with at least $10 million in revenue averaged a federal tax rate of 13 percent in 2010 – prompting Congressional leaders to propose closing several tax loopholes.  When state and local taxes are added to the mix, the total tax rate rises slightly, to 17.4 percent.   When the tax rates paid by companies with less than $10 million in revenue are added, the average reaches 22.7 percent.  Since the 1980s, the GAO estimates that corporate income taxes have accounted for 6 to 15 percent of federal revenue.

Internationally, income tax percentages for corporations are higher than federal income tax percentages, but they have been declining in recent years.  In 2008, actual tax rates paid on corporate worldwide income by companies collecting more than $10 million in revenue annually amounted to about 20.8 percent.  By 2010, this number had dropped to 16.9 percent.

What do these percentages represent in dollar amounts?  According to the GAO, the Treasury received $242 billion in corporate income taxes in 2012.  While $242 billion is hardly pocket change, the amount pales in comparison to the $845 billion collected in FICA taxes or the $1.1 trillion collected in individual income taxes.

Coincidentally, $1.1 trillion is also the approximate net pre-tax income for all corporations in 2010.  Profitable companies reported $1.4 trillion in aggregate pre-tax profits, while unprofitable companies reported $315 billion in losses in that year.  Accounting for transactions between corporate units on their tax returns saved $762 billion in 2010 and lost just $20 billion, according to the Internal Revenue Service.

Several factors can affect what types and amounts of revenue and taxes paid are reported in which circumstances, which makes corporate tax figures worldwide a difficult topic to quantify specifically.  However, the newly-released numbers provide a snapshot of how corporations are faring around the world – and how they are giving back.

At Daley and Associates, our experienced recruiters specialize in placing financial professionals in key positions throughout the Northeast.  If you are looking for financial recruiters in Boston, contact us today.

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