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The foreign tax credit is an oil subsidy since the 'creative' oil companies started structuring their royalties to foreign governments as taxes, so they can ded
by mikeyouse 10y ago
The foreign tax credit is an oil subsidy since the 'creative' oil companies started structuring their royalties to foreign governments as taxes, so they can deduct them against profits.
If Exxon has to pay a royalty of $1/barrel to Nigeria for access to their oil fields, rather than account for the royalty 'properly', they structure the deal to pay a $1/barrel tax to Nigeria. Then they can claim that they paid taxes instead of royalties and get the offset from the foreign tax credit.
- linkregister 10y agoI don't doubt you but can you explain this in greater detail? I have filed for the foreign tax credit and it disqualifies most non-income taxes. I would presume royalties would be covered by this.
- mikeyouse 10y agoRoyalties are excluded, and the IRS has clamped down more in defining what exactly counts as income tax, but it's still common for oil and gas companies to structure their payments as taxes to get the credits. For instance, in Saudi Arabia, there is an 85% corporate tax rate on oil/gas companies and a 20% corporate tax rate on the average business. It sure looks to me like that's a 20% tax rate plus a 65% royalty rather than an 85% rate, no? http://taxfoundation.org/blog/treating-royalties-governments-taxes-they-are http://taxfoundation.org/blog/treating-royalties-governments...
- CountSessine 10y ago<citation required>
- mikeyouse 10y agohttp://taxfoundation.org/blog/treating-royalties-governments-taxes-they-are http://taxfoundation.org/blog/treating-royalties-governments...