WASHINGTON: The annual cost of corporate tax breaks - including one that eases shifting profits offshore and out of the US taxman's reach - has more than doubled to $180 billion since 1987, according to a report released on Monday.
Corporate tax deferral, the potential indefinite postponement of US taxes on profits held offshore, makes up nearly a quarter of that sum, according to Government Accountability Office report released on April 15, which is the deadline for individuals to file their tax returns.
The study comes as lawmakers work to revamping the US tax code, a task that is expected to involve scrubbing the code of breaks to fund a cut in the top corporate income tax rate, now at 35 percent. Legislation is expected this year in the US House of Representatives and possibly the Senate.
Prospects for success are unclear, with Republicans and Democrats squabbling over whether new revenue is needed, and corporate lobbyists gearing up to protect their tax perks.
The last major rewrite of the US tax code occurred in 1986, as a divided Congress agreed to lower rates and cut deductions under Republican President Ronald Reagan. Since then the code has been larded up with special provisions.
Revenue lost by the government from corporate tax provisions rose to $180 billion in 2011 from $84 billion in 1987, according to the GAO. That figure was $116 billion in 2010, after which Congress further extended corporate tax write-offs.
Some Democrats in Congress want to restrict the methods companies use to avoid US taxes.
"Today, many Americans are paying their federal income taxes to contribute their fair share to the cost of our national security and of vital public services, but much of corporate America is still not doing the same," said Representative Lloyd Doggett, a Democrat from Texas who requested the GAO report and introduced legislation to tighten tax rules on Monday.
His bill will be almost certainly be dead on arrival in the Republican-controlled House, though parts of it may reemerge during tax talks.
Corporations largely defend their tax breaks as an essential part of doing business.
They complain that the United States has the highest corporate income tax rate in the industrialized world, although the "effective" tax rate paid after deductions, credits, exemptions and other breaks, is much lower.
Doggett's legislation takes aim at tax deferral, which allows corporations not to pay tax on foreign profits as long as they never come into the United States. As a result, many US companies stash foreign profits offshore. The bill would subject such income to US tax.
US-based multinational corporations are estimated to hold about $1.7 trillion offshore, in large part to avoid taxes.
Tax deferral by foreign units of US companies accounted for $41 billion in 2011, GAO said. That has grown from about $11 billion in 2005, according to the Pew Charitable Trusts.
President Barack Obama has called for tightening deferral rules, but Republicans generally object.
The biggest corporate tax break in 2011 was accelerated depreciation of machinery and equipment, accounting for $76 billion of the revenue loss.
The US Chamber of Commerce, a powerful business lobbying group, earlier this month told tax-writing lawmakers that accelerated depreciation must be preserved, even with a trimming of the corporate tax rate.
Doggett plans to introduce several bills on Monday, including provisions to stiffen penalties for failing to disclose foreign profits and to require more disclosure.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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