Although Tesla indicates its foreign tax bill came to $839 million, its state tax bill was only $9 million. And its federal tax bill was zero.
“That defies common sense, but it does not defy the US tax code,” said Martin Sullivan, chief economist for Tax Analysts, a nonprofit tax publisher, and an expert on US corporate tax practices.
Moving profits overseas — on paper
Sullivan said he believes the $130 million loss on its US operations is most likely due to a common practice for US multinational corporations: structuring their operations so that overseas subsidiaries are the ones reporting income, leaving the US operation to have little or no taxable income to report.
For example, a company can assign its intellectual property to one of those foreign entities, and charge its US unit a fee for using that property. And thus, the foreign operation is very profitable, while the US company — burdened with “costs” to the company itself — reports either a loss or very little income.
“It’s a US multinational thing. It’s very common. It’s almost malpractice not to do that,” said Sullivan.
A recent report from the US Department of the Treasury found 61% of the international profits of US multinational companies are booked in seven small countries — Bermuda, the Caymans, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland — known as tax havens. It’s a practice that many elected officials and the Biden administration have vowed to crack down on.
“Tesla and other giant corporations have long used scams and loopholes to help them get out of paying taxes — that has to stop,” said Sen. Elizabeth Warren, a frequent critic of Musk. “Democrats are working to end Republican tax cuts for corporations shifting profits and jobs overseas.”
However, Congress has so far failed to take action to stop it.
The financial filing by Tesla doesn’t spell out what it did exactly, though. For example, it doesn’t say which country or countries it made its profit in while reporting a US loss. And Tesla declined to respond to a question about its filing.
Tesla doesn’t expect to pay US taxes any time soon
Considering the substantial financial help that Tesla has long received from government support for its electric cars, the company doesn’t have to use a shell game of offshoring its profits to avoid paying taxes. Instead, it could use past losses to shelter its current income from any tax bill.
Once again, this is a common practice for companies that lose money: losses result in a future tax break.
Tech companies that lose money for years before turning a profit — such as Amazon (AMZN) — have used …….
Source: https://www.cnn.com/2022/02/10/investing/elon-musk-tesla-zero-tax-bill/index.html