According to a new report by a corporate watchdog group, Wal-Mart has used a tax loophole to wriggle out of paying more than $2 billion in state taxes since 1999. The report was prepared by Citizens for Tax Justice (CTJ), a nonpartisan research and advocacy group that fights for tax fairness.
Ã¢â‚¬Å“Wal-Mart avoided $2.3 billion in state income taxes, cutting its payment to state governments almost in half between 1999 and 2005,Ã¢â‚¬Â notes the CTJ report. Ã¢â‚¬Å“Over those seven years, Wal-Mart reported $77.4 billion in pretax U.S. profits to its shareholders. But it reported a total state income tax bill of only $2.4 billion, just 3.16 percent of those profits. Had Wal-Mart paid taxes at the statutory state corporate tax rates for the same period, it would have paid $4.7 billion in state income taxes.Ã¢â‚¬Â
In February, the Wall Street Journal reported that the mega-corporation was aggressively using a Ã¢â‚¬Å“captive Real Estate Investment Trust,Ã¢â‚¬Â or REIT, based in Delaware. Says CTJ: Ã¢â‚¬Å“It works like this: an individual buys a house, and then rents it back to himself to save on taxes but a scheme like this would land ordinary Americans in jail for tax evasion. But by essentially paying rent to itself and then deducting that cost as a business expense in states where it should be paying taxes, Wal-Mart has avoided paying $2.3 billion.Ã¢â‚¬Â
Ã¢â‚¬Å“Wal-Mart is rigging the system to avoid paying its fair share,Ã¢â‚¬Â said Robert McIntyre, CTJÃ¢â‚¬â„¢s executive director. He said the scheme should be a Ã¢â‚¬Å“wake-up call for states to update their laws and require corporations to report the combined nationwide profits of all their subsidiaries, so that schemes and loopholes donÃ¢â‚¬â„¢t disguise big corporationsÃ¢â‚¬â„¢ real profits.Ã¢â‚¬Â
Added Greg Tarpinian of the labor group Change to Win, Ã¢â‚¬Å“Wal-Mart is hurting working families in cash-strapped states by walking away with public money needed for emergency rooms and new schools. Wal-Mart has been cutting legal and ethical corners on our backs, and itÃ¢â‚¬â„¢s time for responsible businesses to join working families in calling on Wal-Mart to change.Ã¢â‚¬Â
The solution, advocates say, is for states to institute Ã¢â‚¬Å“combined reportingÃ¢â‚¬Â measures for tax collection, which would prevent companies from shifting profits from state to state to avoid tax implications.