U.S. Oil Firms Continue Tussle Over Taxes
August 30 2016 - 01:07PM
Dow Jones News
By Bradley Olson
U.S. oil companies have been pushing for changes to U.S.
corporate tax laws that require them to pay taxes on foreign
earnings, and news that the European Union's antitrust regulator is
requiring Ireland to claw back billions in tax dollars from Apple
Inc. could strengthen their case.
Oil chiefs, like many other executives in different sectors,
have said federal tax policy represents double taxation because
companies have to pay to other countries for operations there and
then face U.S. taxes on world-wide earnings.
"American companies are disadvantaged on tax policy," John
Watson, the CEO of Chevron Corp., said in an interview with The
Wall Street Journal in April. "We have to have a dialogue about
what will be effective policies to enable American companies to
compete and have a level playing field."
Due to a U.S. exemption that doesn't require the payment of
taxes if cash isn't repatriated, many companies have avoided
reinvesting some overseas profits into U.S. operations. One example
in recent years was Devon Energy Corp., an Oklahoma City oil and
gas producer.
Devon sold assets in Brazil and Azerbaijan for more than $7
billion, but the company kept an overseas cash balance of at least
$6 billion for more than a year to avoid paying U.S. taxes on the
money. Devon invested the money into oil sands projects in Canada
to avoid paying a U.S. tax bill that would have exceeded $1
billion, company officials said.
The biggest U.S. oil companies, such as Exxon Mobil Corp. and
Chevron, have an effective global tax rate that usually is above
40%, among the highest in any industry. Yet those companies pay a
much lower amount in U.S. federal taxes.
In the last two years, oil-and-gas companies have endured the
worst price crash in a generation, so many are booking losses,
which reduces the amount of taxes that could be claimed by foreign
regulators such as the EU in its case against Apple.
Mr. Watson at Chevron and others have said they support
eliminating industry tax benefits if the corporate tax rate is
reduced. Among the largest: deductions for so-called "intangible
drilling costs," or the many costs associated with tapping new oil
and gas wells. The Obama administration has repeatedly sought to
eliminate such beneficial tax policies for the energy industry,
usually in annual budget proposals, but those efforts have
failed.
Write to Bradley Olson at Bradley.Olson@wsj.com
(END) Dow Jones Newswires
August 30, 2016 12:52 ET (16:52 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Chevron (NYSE:CVX)
Historical Stock Chart
From Feb 2024 to Mar 2024
Chevron (NYSE:CVX)
Historical Stock Chart
From Mar 2023 to Mar 2024