Profitable US Firms Expect To Pay Less Tax This Year

by Leroy Baker, Tax-News.com, New York

03 February 2004

US-based multinationals expect to pay less tax this year than in 2002 in spite of rapidly rising profit levels, a study conducted by the Financial Times has shown.

According to the FT’s analysis of the 100 largest US firms and their earnings statements, the 68 multinationals that have so far reported profitable earnings are expecting to pay 30.6% of last year’s income in tax to the revenue authorities of the United States and overseas governments. This compares with the 33% paid in tax the previous year, and will result in an aggregate saving of $8 billion for the companies concerned, the FT calculated.

It is thought that reasons for this downward trend after a year of healthy corporate profits include the growing tendency to outsource back-office administration offshore. However some firms have indicated that they have successfully employed tax strategies to minimize tax liability, despite the US government’s best efforts to stifle various minimization schemes.

Companies also point to international growth as a reason for their reduced tax burden this year.

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