How to reduce your taxes to 11% (Don't you wish you could?):
nytimes.com
Some large companies, encouraged by top law and accounting firms, are adopting a new strategy to cut taxes legally on profits they make in this country.
The technique works this way: A company transfers profits earned in America to a paper company in another country, like Barbados or Luxembourg, that has a special kind of tax treaty with the United States.
These treaties, originally intended to serve American economic interests abroad, allow companies through accounting sleight of hand to transform taxable profits into expenses that they can deduct on their American tax return. These tax-deductible expenses include interest payments to the overseas company, royalties for use of the company's logo and fees for management advice from the overseas company.
The paper company then sends the money to the United States company's worldwide headquarters in Bermuda, which has no income tax and is the tax haven of choice for many companies. In short, what once were taxable profits have been turned into virtually untaxed dollars for use anywhere in the world.
Large publicly traded companies can use this method to reduce taxes on American profits to as little as 11 percent, from an average of 21.5 percent.
... By creating a tax triangle out of the United States, Bermuda and a country like Barbados or Luxembourg, and pushing every rule to the limit, companies can legally pay as little as 11 percent of their American profits in taxes to the United States, said Richard E. Andersen, a tax lawyer at Arnold & Porter in New York and author of "Income Tax Treaties of the U.S.," a tax guide published by Warren Gorham & Lamont.
... Congress imposes a 35 percent tax on profits of large companies, but after taking advantage of deductions and loopholes, the largest 9,669 companies paid an average of 21.5 percent of their profits in American income taxes in 1998, the latest data from the Internal Revenue Service shows. These taxes totaled $141.6 billion, or nearly 18 percent of the total income taxes paid by companies and individuals. |
