Friday, October 17, 2014

On Fuel Prices, Taxes, and Profits

ExxonMobil's fuel tax map of the United States shows regional variation in tax policy:

The page's author presents a defense to the charge that oil companies are scamming government out of tax money: the government earns in taxes an order of magnitude more on each gallon refined, shipped, and sold in the United States than ExxonMobil earns in profit on the same gallons.

The defense is interesting, but I think it dodges the charge.  Those who accuse multinational oil companies of running a tax scam aren't focused on sales taxes imposed on locally-sold products, but the international business of companies that historically paid U.S. income taxes on income earned in foreign jurisdictions.  From the point of view of ExxonMobil, of course, the government collects not only 40 to 60 cents per gallon refined, shipped, and sold in the U.S. – but also 35% income tax on ExxonMobil's 5.5¢ profit per gallon.  From the perspective of ExxonMobil's detractors, what has that to do with ExxonMobil's 'right' to use U.S. resources to build and defend a global business empire from which it gathers income free of U.S. taxes?

It's an interesting situation that invites inquiry into local competitive conditions globally and examination of the practical effects of tax policy.  With the elimination of the double-Irish scheme, international tax planning will take another wave of innovation (and consultants in the area will make another fortune).  Is there a tax policy that will result in more tax collected and less resources wasted avoiding taxation?

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