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Is There A Way To Figure A Corporations...................
Old 08-25-2016, 01:34 PM   #1
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Is There A Way To Figure A Corporations...................

actual effective tax rate from a basic financial statement like the following ?
https://finance.yahoo.com/quote/FSLR/financials?p=FSLR

I'm a conservative, but I get so sick & tired of hearing fellow conservatives whining that America has the highest corporate tax rate in the world at 35.00% when I suspect very few, if any, actually pay anywhere near that amount.

Thanks
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Old 08-25-2016, 01:59 PM   #2
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Used to w*rk for Megacorp and they would routinely discuss our effective corp. tax rate during quarterly/yearly "management" meetings. It was quite often in the 25% to 28% range IIRC - but only because it was a blend of US (at 35%) and other country's tax rates - virtually all lower. Nothing to do with getting some kind of "break" from the USA tax guys. Money taxed OUS had to stay OUS, so could only be used in other countries - to their advantage, IMO. I saw the logic for Megacorp and OUS countries, but not for the USA. I don't think of this concept in conservative terms - just practical. What you want MORE of, you tax LESS and vice versa. As always, you are welcome to disagree - heaven knows, many folks do as YMMV.
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Old 08-25-2016, 02:13 PM   #3
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Quote:
Originally Posted by ownyourfuture View Post
actual effective tax rate from a basic financial statement like the following ?
https://finance.yahoo.com/quote/FSLR/financials?p=FSLR

I'm a conservative, but I get so sick & tired of hearing fellow conservatives whining that America has the highest corporate tax rate in the world at 35.00% when I suspect very few, if any, actually pay anywhere near that amount.
Just be aware that you can't know the true cost of the tax rate unless you a know the cost of the measures the companies are using to avoid it. If they are avoiding the 35% tax by using sub-companies, accounting tricks, legions of lawyers, etc that cost them 34% in overhead and reduced efficiency, then it is still worth it to the company--and it still reduces US competitiveness and induces companies to keep money overseas rather than re-invest it in their US operations.
Bottom line: I don't think your search for an answer among corporate balance sheets is going to produce useful insight.
Plus, the next logical step would be to figure out how much of the corporate income tax (and/or higher costs caused by those tax rates) was ultimately paid by US consumers (due to higher prices). That's another major complaint about high corporate tax rates.
The manifold benefits of reducing US corporate tax rates is a rare area of (general) cross-spectrum political agreement.
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Old 08-25-2016, 02:26 PM   #4
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actual effective tax rate from a basic financial statement like the following ?
https://finance.yahoo.com/quote/FSLR/financials?p=FSLR
Actually, no need to get into anyone's personal politics for this one.

When I want to look at taxes I get the company's 10-K. They will have taxes listed in the income section. Then look on the balance sheet for 'deferred taxes', which represent a tax obligation that hasn't been paid. Add all the taxes, paid plus deferred, for the 3 years on the report, then average the amount. That's pretty much the total tax liability rate.
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Old 08-25-2016, 02:38 PM   #5
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Every public company's financial statements will have a footnote on income taxes in the financial statements, and if it is a US company it will have a reconciliation between taxes at the statutory 35% tax rate and what their actual tax expense was. For the company that you linked, part of the footnote is copied below:

Quote:
Our income tax results differed from the amount computed by applying the U.S. statutory federal income tax rate of 35.0% to our income before income taxes for the following reasons for the years ended December 31, 2015 , 2014 , and 2013 (in thousands):
I can't copy the table but here is a link (go to "20. Income Taxes"): EDGAR Pro
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Old 08-26-2016, 11:10 AM   #6
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Google to the rescue:
https://www.nerdwallet.com/blog/inve...tax-rate-paid/
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Old 08-26-2016, 12:11 PM   #7
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One of the problems you have is what are you basing the calculation on...

IOW, the income reported by a corporation and the taxable income reported on their tax return can be the difference in size of Pluto and Jupiter....

I have seen where a company had over $2 mill book profit and about $1 million tax loss... so no taxes paid.. but, you cannot take no taxes and divide by book income as that is not how the tax rate is applied...


Also, it is a marginal rate...

Last, it does not include state income taxes... in my last job we had to file 10 separate state tax returns...
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Old 08-26-2016, 12:26 PM   #8
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Very interesting link. Thanks Totoro!
Thanks to all the others who replied as well.

I would recommend anyone reading this to check out this link.
By chance, while scrolling down the page, I saw First Solar, the company whose income statement I used as an example in this thread.

Income = Pre-tax earnings in $ million. (54)
I'll assume the number having parentheses around it means it was a loss of 54 million ?

U.S. Tax Rate Paid = Current portion of 'Federal taxes' / Pre-tax earnings
Refund

Effective Tax Rate = All taxes declared (Current & Deferred, Domestic & Foreign) / Pre-tax earnings.
Negative

I didn't look at them all, but another that caught my eye was Ford Motor Company.

Income in $ million: 8681 Almost 8.7 Billion ?
U.S. Tax Rate Paid: Refund
Effective Tax Rate: Negative

I'm going to try & hire Ford's accountant.
I want that guy working for me next April
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Old 08-26-2016, 12:49 PM   #9
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Originally Posted by ownyourfuture View Post
I'm a conservative, but I get so sick & tired of hearing fellow conservatives whining that America has the highest corporate tax rate in the world at 35.00% when I suspect very few, if any, actually pay anywhere near that amount.
As others have noted, it's pretty easy to find the effective tax rate for any public company. There are some corporations that do pay 35%***, the overall average might surprise you based on your last sentence. The profitable corporations that pay no corporate taxes are an exception, and many are deferring taxes, they'll pay eventually. Many sources online, here's just one...
Quote:
Out of the 34 countries in the OECD, America ranks first with a 39.1 percent corporate tax rate, compared to an OECD average of 24.1 percent. The OECD figure is what’s called the statutory rate, meaning the base rate applied to corporate profits.
[HOWEVER]
The most recent estimate comes from the World Bank and International Finance Commission, which put the United States’ effective rate for 2014 at 27.9 percent. That’s second-highest behind New Zealand among OECD countries and 15th-highest among the 189 countries measured.

In 2011, the Tax Foundation published a survey of 13 prior estimates of the United States’ effective tax rate from 2005 to 2011. All 13 studies pegged the U.S.’s rate as above average, but none had the U.S. rate first overall.

Another 2011 study by the Congressional Research Service put the U.S. effective rate at 27.1 percent, slightly lower than the OECD average of 27.7 percent.
http://www.politifact.com/punditfact...te-free-world/

*** http://www.forbes.com/pictures/mef45.../#2f515e4792d1
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Old 08-26-2016, 01:40 PM   #10
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Originally Posted by ownyourfuture View Post
Very interesting link. Thanks Totoro!
Thanks to all the others who replied as well.

I would recommend anyone reading this to check out this link.
By chance, while scrolling down the page, I saw First Solar, the company whose income statement I used as an example in this thread.

Income = Pre-tax earnings in $ million. (54)
I'll assume the number having parentheses around it means it was a loss of 54 million ?

U.S. Tax Rate Paid = Current portion of 'Federal taxes' / Pre-tax earnings
Refund

Effective Tax Rate = All taxes declared (Current & Deferred, Domestic & Foreign) / Pre-tax earnings.
Negative

I didn't look at them all, but another that caught my eye was Ford Motor Company.

Income in $ million: 8681 Almost 8.7 Billion ?
U.S. Tax Rate Paid: Refund
Effective Tax Rate: Negative

I'm going to try & hire Ford's accountant.
I want that guy working for me next April


Ummmm, I would bet BIG money that Ford has a big loss carry forward from the 2008 financial crisis... and probably will not pay taxes for many years to come...

That is also why looking at one year is meaningless when it comes to taxes...
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Old 08-27-2016, 02:39 AM   #11
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Ummmm, I would bet BIG money that Ford has a big loss carry forward from the 2008 financial crisis... and probably will not pay taxes for many years to come...
Agree.

First solar probably is linked to tax credits. Tax is complicated. There is also a difference between having a tax liability (recorded in the P&L) and actually paying the tax.

Given those caveats, it is still however to me interesting to see that many companies actually pay relatively close to the 'list price'.
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Old 08-27-2016, 06:56 AM   #12
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Deferred tax accounting attempts to match tax expense with earnings in a comparable way. So if Ford had big tax losses in previous years they would likely have recorded tax deferred "assets" at the time. These would be drawn down in future years when Ford had taxable earnings. This mechanism would allow for a tax "expense" to be recorded on their Income Statement, even if no taxes are currently payable.

There is plenty of disclosure by corporations of their "effective tax rate" in the notes to their FS. These are audited and always correct if somewhat complicated. When I was doing this kind of stuff, our effective tax rate was in the low 20% range when the statutory rate was about 10% higher.
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