GAO report - Corporate income tax: effective tax rates vs. statutory rate 

July 1: The U.S. Government Accountability Office (GAO) today publicly released a report, prepared for Congress pursuant to a request to examine the effective tax rates paid by U.S. corporate income taxpayers and to compare those rates to the statutory rate. Corporate Income Tax: Effective Tax Rates Can Differ Significantly from the Statutory Rate (GAO-13-520) (May 30, 2013).

The GAO report [PDF 1.33 MB] finds that:


  • Effective tax rates differ from statutory tax rates in that they attempt to measure taxes paid as a proportion of economic income, while statutory rates indicate the amount of tax liability (before any credits) relative to taxable income, which is defined by tax law and reflects tax benefits and subsidies built into the law.
  • GAO compares book tax expenses to tax liabilities actually reported on corporate income tax returns.
  • For tax year 2010 (the most recent information available), profitable U.S. corporations that filed a Schedule M-3 paid U.S. federal income taxes amounting to about 13% of the pretax worldwide income that they reported in their financial statements (for those entities included in their tax returns).
  • When foreign and state and local income taxes are included, the effective tax rate for profitable filers increased to around 17%.
  • The inclusion of unprofitable firms, which pay little if any tax, also raised the effective tax rates because the losses of unprofitable corporations greatly reduce the denominator of the measures. Even with the inclusion of unprofitable filers, which increased the average worldwide effective tax rate to 22.7%, all of the effective tax rates were well below the top statutory tax rate of 35%.
  • The GAO could only estimate average effective tax rates with the data available and could not determine the variation in rates across corporations.
  • The limited available data from Schedules M-3, along with prior GAO work relating to corporate taxpayers, suggested that effective tax rates are likely to vary considerably across corporations



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