Politics

Alaska oil companies overstating tax burden?

How much do Alaska oil companies really pay in taxes? A new federal study suggests it may not be as much as Gov. Sean Parnell's administration claims.

Congress' accounting arm, the Government Accountability Office, looked at the top official corporate tax rate of 35 percent and compared it to what companies actually pay. GAO auditors used IRS data to calculate "effective" tax rates, or what companies really paid after taking into account exemptions, deferrals, credits, and other incentives that lower tax bills.

"Effective tax rates can differ significantly from statutory tax rates," according to the study, which was released last week.

The study looked only at profitable companies, and concluded they actually paid about 13 percent of their profits in corporate income taxes, compared to the top rate in statute of 35 percent. When the GAO auditors looked worldwide and included foreign corporate income taxes, along with state and local income taxes in addition to federal taxes, they found the total rate paid was still less than 17 percent -- far less than the statutory 35 percent rate.

Those numbers were a key part of the successful effort to persuade the Alaska Legislature to lower state oil taxes. A citizen referendum seeking to repeal the measure is collecting signatures across the state.

'Government take'

The corporate income tax rate is one of four major components of what's known as "government take," the measure by which legislators compared Alaska to other jurisdictions. That calculation includes royalty, production tax and property tax, along with state and federal income taxes.

The Parnell lobbying team and other tax-cut advocates claimed that Alaska's taxes were higher than competing jurisdictions, particularly the developed countries that are members of the Organization of Economic Co-operation and Development.

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That calculation, though, was based on the statutory federal tax rate of 35 percent, not the effective rate that was actually paid, making Alaska's rate appear relatively higher.

That means the government take in Alaska is not as high as the Legislature was told, and that oil company profits are higher, said Sen. Bert Stedman, R-Sitka.

"The actual reality is (that) their portion is higher than reflected in our numbers because of the higher portion not going to the IRS," said Stedman, a critic of dramatic tax reductions.

Sen. Bill Wielechowski, D-Anchorage, said he was happy to get an authoritative estimate on what was actually paid in federal income taxes.

"This has been a point of contention for us for the last three years, what's the actual government take?" he said.

'Massive write-offs'

One thing that was clear, he said, was that using a 35 percent take rate to calculate government take was not accurate. He said he wasn't surprised to see that 35 percent may be double or triple what's really paid.

"They have these massive write-offs," Wielechowski said. "No one pays 35 percent, certainly not the oil industry." Alaska also has a state corporate income tax with a maximum rate of 9.4 percent, but consultant Barry Pulliam with Econ One Research Inc. testified to legislators that the effective rate for that tax was 6.5 percent, a number also used by others.

Use of a 35 percent federal rate for calculating of government take was defended by Dan Stickel, assistant chief of the Department of Revenue's Economic Research Section, in testimony before the Legislature. He said he had not yet seen the GAO study.

The Department of Revenue was not alone in using the 35 percent rate in its analysis, and several consultants used the same number.

"For the federal corporate income tax rate and government take analysis, we used the 35 percent marginal rate," Stickel said. "That's consistent with what Pedro van Meurs used, with what Econ One used, and with what the Legislature's consultant used," he said.

At least one oil company, ConocoPhillips, also used a federal rate of 35 percent in its testimony, Stickel said.

"They were similar to what we were putting up," he said.

During debate on Parnell's proposed oil tax cut, Stedman questioned the use of 35 percent in calculating the government's take.

Stedman, a financial adviser, said he was confident that Exxon Mobil Corp. did not pay anywhere near that amount, and that if the company ever did pay that much, its tax adviser would be the next person in the company to be fired.

Contact Pat Forgey at pat(at)alaskadispatch.com

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