It is often said that taxes and death are two certainties in life that people cannot avoid. However, there are certain profitable companies that have been able to escape the tax front. There are about 27 companies that are part of the Standard & Poor’s index of 500 companies where there are firms like LVLTA which is a Level 3 Communications company, United Continental airline and General Motors, amongst others who have reported that there are no income taxes that they are liable to pay for 2015. This is despite the profits in the pre tax segment that have been reported. This data has been published in USA TODAY as per the data analyzed by a global market intelligence firm S& P. This Article talks about how certain US companies have avoided heavy taxes.
What the study shows?
The analysis was based on profitable firms of the last financial year. That is because firms that have lost money in the last financial year, like energy companies, would not be expected from making tax payments. As far as investors are concerned, those who are looking to escape the taxman might not stand to have an advantage. Companies that did not have taxes to pay have not done well on the shares front as the average on shares has been down by 11%. This is twice more the decline that was noted in the previous period when a similar analysis was done by S&P.
Link between performance and tax bills
Many might find it surprising that underperformance has become an issue when companies have put in effort and come up with lowered tax bills this year. That points to the fact that income tax might not have a direct linkage on how well a company or an industry performs in a financial period. It is merely an issue that is the bottom of the financial earnings and profitability list. Some investors however point out that companies that have been paying fewer taxes could be due to the slow pace of growth in profits and revenue. For most companies in the US the focus is to build on their bottom line, but for some it also involves finding ways on how to reduce the liabilities in the tax segment. Click Here for How Does Filing Income Taxes In The US Work?
Different steps companies have taken
There are different steps that companies have taken in order to reduce their tax burden. For instance, some companies like Pfizer, the drug maker company, took advantage of the lowered rates in taxes overseas. This is a practice that is not without criticism in the economy. However, the drug maker formed a plan of merger with Allergan and they moved their company headquarters to the country of Ireland. There are other companies that have been looking to move their headquarters to lower tax paying places. However, state authorities are coming up with concepts like paying an exit fee for those looking to move their key operations to lower tax paying regions.