US Big Oil Corps pay foreign royalties to many countries in order to permit them to deplete these foreign countries' natural resources.
In doing so, US Big Oil Corps treat some of these foreign royalty payments to foreign governments as foreign income taxes paid. By doing so, some of these US Big Oil Corps get a dollar-for-dollar foreign income tax credit for US Federal Income purposes.
So, how big of a deal is this? Well, a really big deal.
From Chevron's 10K income tax footnote, it paid Foreign Income Taxes of $16.5 bil in 2011 on Foreign Pretax Income of $37.4 bil in 2011, for a Foreign Income Effective Tax Rate Paid of 44.2% in 2011. And the US Federal Statutory Income Tax Rate of 35% is the highest in the world. In other words, Chevron is ballooning up its Foreign Income Tax Rate Paid by the Foreign Royalties it is paying to deplete the natural resources of some foreign countries. And what was the US Federal Income Effective Tax Rate Paid by Chevron in 2011? A substantially lower 18.5%.
It's even worse for Exxon Mobil, which paid Foreign Income Taxes of $28.8 bil in 2011 on Foreign Pretax Income of $61.7 bil in 2011, for a Foreign Income Effective Tax Rate Paid of 44.2% in 2011. And Exxon Mobil's Foreign Income Effective Tax Rate Paid in 2010 was 46.6% and in 2009 was 49.2%. And what was the US Federal Income Effective Tax Rate Paid by Exxon Mobil in 2011? Would you believe only 13.6%? It's true.
And the SEC just sits there and let's this subterfuge take place. And so does the IRS. And some progressives in the US Congress wonder why US citizens are so disappointed in the effectiveness of some of the US Government Agencies? And also disappointed of the lack of proper oversight of these US Government Agencies by the US Congress?
The more foreign royalties they treat as foreign income tax paid, the more dollar-for-dollar foreign income tax credits they get to use against their US Federal Income Tax owed. What an incredible sham!
That's not a bad deal for the US Big Oil Corp. It effectively has the US taxpayer paying for 100% of some of their royalties paid to foreign countries for depleting the foreign countries' natural resources.
So what does the US taxpayer get for picking up 100% of this tab of these foreign royalties?
Well, actually nothing.....all of the future income from the oil taken out of the ground in the foreign country accrues to the US Big Oil Corp.
How in the world did we end up with a situation like this? Well, it's the awesomely powerful US Big Oil Lobby that owns a sufficiently large enough portion of the US Congress.
And it's the US Congress which hides what is going on here and also doesn't have the guts to stand up to US Big Oil.
My
proposal here is that no foreign royalties paid by US Big Oil Corps to
foreign governments to deplete their natural resources can be considered foreign income taxes paid to a
foreign government, and thus they also cannot be included as dollar-for-dollar foreign
income tax credits for US Federal Income tax purposes.
I think Disguising Royalty Payments to foreign
governments as foreign income taxes is so clearly abusive that I think
the US Government should make my proposal here retroactive. After all, they just did it for many of the Tax Extenders they just passed in the American Tax Relief Act of 2012.
All the money raised here should be used to reduce the US Debt.
