Tax Policy:

1987 Company Effective Tax Rates Higher Than in Prior Years

GGD-90-69: Published: May 10, 1990. Publicly Released: May 17, 1990.

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Pursuant to a congressional request, GAO reviewed the overall domestic and international tax burdens of large U.S. companies for 1986 and 1987.

GAO found that: (1) the U.S. companies included in the study had higher U.S. and international effective tax rates in 1987 than in 1986 or the years included in earlier studies; (2) 1987 industry effective tax rates increased over earlier periods; (3) the increases in 1987 seemed consistent with the intent of the changes introduced by the Tax Reform Act of 1986, which reduced many tax benefits, including the elimination of the lower tax rate for capital gains and the investment tax credit; (4) in 1987, nearly 19 percent of the companies and 7 percent of the industry groups had U.S. effective tax rates below 10 percent, while 20 percent of the companies and 17 percent of the industry groups had rates above 40 percent; (5) where data was available to recompute 1986 and 1987 rates, 38 of the 63 companies and 34 of the 71 companies, respectively, with high or low U.S. effective tax rates were affected by timing differences; (6) it could not determine the impact of permanent differences on U.S. rates because financial statements did not identify permanent differences attributable exclusively to U.S. operations; and (7) the number of industries and companies with high and low international rates decreased with the inclusion of timing differences and decreased further with the inclusion of permanent differences.

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