IBM responds to Citizens for Tax Justice Report

IBM responds to Citizens for Tax Justice Report

Read at the link.  [More later.]

[Update: Citizens for Tax Justice debunks what IBM put out as a diversion to the fact that the multinational company really isn’t paying US federal tax at a rate that is anywhere near what the general public thinks corporations would pay. What the company is doing is taking credit for the “deferral” of taxes. The deferral (which is a term of art in corporate tax planning) happens when companies are managed to shift revenues to low-tax places (like Caribbean islands), and push expenses into higher tax countries, where those expenses help to shelter revenue.

In theory, the year that the company “brings home” those deferred revenues, they are taxed. So IBM wants to include that possible future flow into the tax rate that it’s playing now.

But Bob McIntyre and the folks at Citizens for Tax Justice know that deferral is bunk. The deferred income never makes its way back to the United States tax return. It most assuredly makes its way back to US dollar holdings, probably Treasury bills and the like, held in offshore accounts.

It’s as if we ordinary taxpayers could park ALL our tax bills in US savings bonds, and defer the tax until the day we decide to cash those savings bonds in. The US government would be eternally borrowing money from us to run the government, the real taxpayers would be footing the interest on that money, and we would have “use of funds” to borrow against (use as collateral) or anything else we might like to do with the other taxpayers’ money.

Congress needs to fix deferral. But a lot of them are bought off, and look the other way.]