Some Companies Spend Less on Taxes than CEO Pay: Study
A study by the Institute for Policy Studies has found that twenty-six big US companies paid their chief executive officers more last year than they did in federal taxes.
In the report, Executive Excess, the Institute said that of last year's 100 highest-paid US executives, 26 took home more in CEO pay than their companies paid in federal income taxes.
On average, the 26 CEOs received $20.4 million in individual compensation, a 23 percent increase over the 2010 average, while paying little or no federal tax on ample profits, according to regulatory filings.
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The study blasted tax rules allowing unlimited deductions for CEO "performance-based" pay, like many stock options. Four pay-related tax breaks combined to cost taxpayers $14 billion in uncollected federal taxes, the report added.
Among the "kingpins" criticised was drug maker Abbott Laboratories, which paid CEO Miles White $19 million while receiving $586 million in tax refunds. Abbott has 64 subsidiaries in 16 countries considered by authorities to be tax havens, the institute said.
Separately, Citigroup CEO Vikram Randit received $14.9 million for his work in 2011 while the bank received a net $144 million in tax benefits based on prior losses.
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It wrote:
Our nation's tax code has become a powerful enabler of bloated CEO pay.
However, some companies have already taken issue with the report, questioning the study methodology.
"This is a blatant misrepresentation of the facts," Abbott spokesman Scott Stoffel told Reuters.
He said Abbott did not get a rebate, but paid the US government $700 million in federal income taxes in 2011, and that the report's numbers reflect a non-cash accounting adjustment caused by the resolution of various tax matters.
A Citigroup spokeswoman said that, while the company did not pay federal income tax in 2011, that was due to substantial losses it recorded in 2008 and 2009, a break available to all businesses in similar straits.
She also noted that Citi paid on average $3.7 billion a year in federal income taxes from 2000 to 2006, and paid other taxes last year, including more than $3 billion in payroll taxes, adding that Pandit voluntarily took a salary of just $1 in 2010.
Commenting on the report, David Wise, a senior principal with human resource management consulting firm Hay Group, said:
All the tax breaks identified in the study are legal and shareholders generally expect companies to take advantage of any reasonable tax breaks they can.
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