oversight

Tax Policy: 1987 Company Effective Tax Rates Higher Than in Prior Years

Published by the Government Accountability Office on 1990-05-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

           United   States   General   Accounting   Office   *


GAO        Report to Congressional Requesters                ’




May 1990
           TAXPOLICY
           1987 Company
           Effective Tax Rates
           Higher Thm in Prior
           Years
General Government   Division

B-238544

May lo,1990

The Honorable Don J. Pease
House of Representatives

The Honorable Byron I,. Dorgan
House of Representatives

This report responds to your request that we review the overall domestic and worldwide tax
burdens of large U.S. companies for 1986 and 1987. As requested, we consulted with Joint
Committee on Taxation staff in designing our study and we included most of the same large
companies to ensure consistency with earlier Joint Committee studies. The companies
included in our study of 1986 and 1987 effective tax rates are identified by name in
appendixes VI and VII, respectively. The report also discusses reasons for high and low
effective tax rates

As arranged with you, unless you publicly announce its contents earlier, we plan no further
distribution of this report until 10 days from the date of issuance. At that time we will send
copies of the report to the tax director of each company included in the study, and to other
interested parties.

Major contributors to this report are listed in appendix VIII. If you have any questions,
please call me on 275-6407.




Jennie Z-3.
          Stathis
Director, Tax Policy and
  Administration Issues
Executive Summ~


                 Over the past several decades, various tax incentives have been added
Purpose          to the tax code enabling companies to lower their taxable income and,
                 thus, lower their tax liability. As a result, some of the Nation’s largest
                 companies did not pay taxes in some years and a number of other com-
                 panies paid far less than the statutory rate.

                 Concerned about the level of taxes paid by various companies and
                 industries, Congressmen Don J. Pease and Byron L. Dorgan requested
                 that GAO review the overall domestic and worldwide tax burden of large
                 U.S. corporations for 1986 and 1987. Specifically, GAO

             l computed effective tax rates for a sample of large companies and
             . analyzed the reasons for particularly low and high effective tax rates.


                 The Joint Committee on Taxation published studies requested by Con-
Background       gressmen Pease and Dorgan that compared the tax burden among indi-
                 vidual corporations and industry groups by calculating their effective
                 tax rates for 1980 through 1983. Effective tax rates indicate a com-
                 pany’s tax liability by measuring income taxes paid in relation to pretax
                 income. Such comparisons identified companies with low effective tax
                 rates and later led to changes in tax law.

                 Effective tax rates can be calculated in a number of ways. GAO, as
                 requested, adopted the Joint Committee on Taxation’s methodology for
                 computing effective tax rates to enable a comparison of 1986 and 1987
                 rates to those in the Joint Committee’s prior studies. This methodology
                 involved dividing income taxes currently payable by pretax income-
                 both as were reported in company financial statements. Any effective
                 tax rates below 10 percent were considered to be low. Those exceeding
                 the statutory rates of 46 percent in 1986 and 40 percent in 1987 were
                 considered to be high.

                 To ensure consistency with earlier studies, GAO included as many of the
                 same industries and companies as possible. Some substitutions were nec-
                 essary because companies had dropped from the Fortune 500 list, had
                 changed industries, or had not reported detailed information needed LO
                 compute effective tax rates. GAO computed U.S. and worldwide effective
                 tax rates for 29 industries and 237 large U.S. companies-220 compa-
                 nies each in 1986 and 1987.




                 Page 2                                         GAO/GGD90-69 Effective Tax Rates
sResults in Brief
                    and 36 percent, respectively) than in 1986 (19 and 28 percent) and the
                    prior years studied by the Joint Committee on Taxation. These results
                    appear consistent with changes introduced in the Tax Reform Act of
                    1986 that eliminated many tax benefits, thereby increasing the taxable
                    income base and the resulting effective tax rate. However, a comprehen-
                    sive evaluation of the Tax Reform Act should be done on the basis of
                    more than 1 year of data because effective tax rates for particular com-
                    panies can fluctuate widely from year to year. Other types of analyses
                    should also be considered, such as those that evaluate how taxes change
                    when additional income is earned or when new investments are made by
                    the company.

                    Even though overall effective rates increased, 2 of the 29 industries (7
                    percent) and 41 of the 220 companies (19 percent) had U.S. effective tax
                    rates belo N 10 percent in 1987. In contrast, 5 industries (17 percent)
                    and 44 companies (20 percent) had 17,s. effective rates above the 40-
                    percent statutory rdtt.

                    Timing differences and permanent differences contributed to low and
                    high effective tax rates. Timing differences reflect financial transactions
                    that are recognized for tax purposes in different periods than for finan-
                    cial reporting purposes. The predominant timing differences include tax
                    deferrals for accelerated depreciation, investment tax credits, pension
                    cost, and state and local taxes that were not currently payable but will
                    be due in future years. Permanent differences between income for tax
                    purposes and income for financial reporting also affect the rates. These
                    differences result from tax laws that make certain transactions nontax-
                    able, nondeductible, or subject to special tax allowances. For example,
                    proceeds from life insurance for key officers or fines or expenses result-
                    ing from a violation of law are recognized for financial reporting pur-
                    poses but not for tax purposes. When included, timing and permanent
                    differences reduce the number of companies and industries with high or
                    low effective rates. Legislative changes designed to limit or eliminate
                    specific timing and permanent differences would likely result in an
                    increase in current. tax revenue.




                    Page 3                                         GAO/GGD9989   Effective Tax Rates
                                        Ekecutive summary




Principal Analysis

1986 and 1987 Effective                 GAO'S  calculation of the average U.S. effective tax rates for the 229 com-
Tax Rates                               panics shows rates of 18.6 percent in 1986 and 27.8 percent in 1987.
                                        The companies’ average worldwide effective tax rates were 28.1 percent
                                        in 1986 and 35.5 percent in 1987. Figure 1 shows that, in general, the
                                        U.S. companies included in GAO'S study had higher U.S. and worldwide
                                        effective tax rates in 1987 than in 1986 or the years included in the
                                        earlier studies.



and Worldwid; Effective Tax Rates for
Years 1980 Through 1983,1986, and       50   Effective   Tax Rates (96)
1987
                                        45

                                        40

                                        35

                                        30

                                        25

                                        20

                                        15

                                        10

                                         5

                                         0




                                             0           U.S.
                                                         Worldwide



                                        Note: The average rates are not exactly comparable because of varlatlons in compames included I” the
                                        computations for some years It IS unlikely. however. that the variations result I” any signlftcant change
                                        m average rates




                                         Page 4                                                          GAO/GGD99-S9 Effective Tax Rates
                               FxecutiveSummary




                               GAO'S analysis shows that, like company rates, 1987 industry effective
                               tax rates increased over earlier periods. Of the 29 industries in GAO'S
                               study, 16 included most of the same companies as those in earlier stud-
                               ies by the Joint Committee on Taxation. Eleven of the 16 had 1987 U.S.
                               rates that were higher than the earlier rates. For example, the average
                               U.S. rate for the aerospace industr. was 30 percent in 1987 compared to
                                16 percent in 1986 and a lo-percent average for 1980 through 1983.
                               (See p. 21.)

                               The increases shown in 1987 seem consistent with the intent of the
                               changes introduced by the Tax Reform Act of 1986. This act reduced
                               many tax benefits, including the elimination of the lower tax rate for
                               capital gains and the investment tax credit. These changes increased the
                               base of taxable income and the resulting effective tax rates. (See pp. 27-
                               28.)

         .___              -
Reasons for Eigh and Low       GAO found that in 1987, nearly 19 percent of the companies and 7 per-
Rates                          cent of the industry groups had U.S. effective tax rates below 10 per-
                               cent, while 20 percent of the companies and 17 percent of the industry
                               groups had rates above 40 percent. (See pp. 25 and 27.)

                               GAO'S  analysis showed that where data were available to recompute
                               1986 and 1987 rates, 38 of the 63 companies and 34 of the 71 compa-
                               nies, respectively, with high or low U.S. effective tax rates were
                               affected by timing differences. The predominant timing differences for
                               companies in 1987 were accelerated depreciation, investment tax cred-
                               its, pension costs, and state and local income taxes that were not cur-
                               rently payable but were expected to come due in future years. (See pp.
                               31-32.)

                               Because financial statements did not identify permanent differences
                               attributable exclusively to U.S. operations, GAO could not determine the
                               impact of permanent differences on U.S. rates. Information was availa-
                               ble, however, to recompute worldwide rates, including timing and per-
                               manent differences for 64 companies in 1986 and 80 companies in 1987.
                               GAO found that the number of companies with high or low worldwide
                               rates decreased from 64 to 17 in 1986 and 80 to 23 in 1987. (See pp. 32-
                               33.)




                               Page6                                         GAO/GGD9@69EffectiveTaxRates
                   GAO   is making no recommendations in this report.
Recommendations

                   GAO  requested comments from the tax directors of the 237 companies
Company Comments   included in the study. Of the 94 companies responding, 41 agreed with
                   the rates computed, 46 disagreed with the rates, and 7 made other com-
                   ments Of those disagreeing, many supplied additional information.
                   Where such information was sufficient, effective tax rates were recom-
                   puted. Others questioned the methodology used in computing the rate,
                   particularly the exclusion of deferred taxes. This methodology, used in
                   earlier studies by the Joint Committee on Taxation, allowed for consis-
                   tent comparisons with previous years. (See p. 42.)




                   Page 6                                        GAO/GGD9989   Effective Tax Rates
Page 7   GAO/GGD9059 Effective Tax Rates
Contents


Executive Summary                                                                               2

Chapter 1
Introduction            Differing Approaches in Computing Effective Tax Rates
                        Objectives, Scope, and Methodology

Chapter 2                                                                                      19
Comparison of           Average 1987 Rates for Companies in Our Study Were                     19
                             Higher Than Rates in Prior Years
Effective Tax Rates     1987 Industry Rates Generally Higher Than Those in                     20
                             Prior Years
                        1987 Company Rates Generally Higher Than 1986 Rates                    25
                        Increased 1987 Rates Consistent With Changes                           27
                             Introduced by the Tax Reform Act of 1986
                        Conclusion                                                             28

Chapter 3                                                                                      29
Timing and Permanent    Effect of Timing Differences on U.S. Rates by Industry                 29
                        Effect of Timing Differences on U.S. Rates by Company                  31
Differences             Effect of Permanent Differences on Effective Tax Rates                 32
Contributed to High     Conclusion                                                             33
and Low Effective Tax
Rates
Appendixes              Appendix I: Scope and Methodology for Computing                        36
                            Effective Tax Rates
                        Appendix II: Comments From Company Officials                           42
                        Appendix III: Comparison of Worldwide Effective Tax                    43
                            Rates by Industry for the Years 1980 Through 1983,
                            1986, and 1987
                        Appendix IV: Comparison of Effective Tax Rates by                      46
                            Industry Group for 1986
                        Appendix V: Comparison of Effective Tax Rates by                       48
                            Industry Group for 1987
                        Appendix VI: Comparison of U.S., Foreign and Worldwide                 50
                            Effective Tax Rates by Industry and Company for
                            1986




                        Page 8                                     GAO/GGD9069 Effective Tax Rates
          Appendix VII: Comparison of U.S., Foreign, and                             66
              Worldwide Effective Tax Rates by Industry and
              Company for 1987
          Appendix VIII: Major Contributors to This Report                           82

Tables    Table 1.1: Effective Tax Rates Under Differing                             15
              Computation Methods
          Table 2.1: Comparison of IJS. Effective Tax Rates by                       21
              Industry for the Years 1980 Through 1983, 1986, and
               1987
          Table 3.1: Number of Industries With High and Low U.S.                     29
              Rates Before and After the Inclusion of Timing
              Differences
          Table 3.2: Effect of Timing Differences on U.S. Effective                  30
              Tax Rates by Industry
          Table 3.3: Number of Companies With High and Low U.S.                      31
               Rates Before and After the Inclusion of Timing
               Differences
          Table 3.4: Predominant Deferrals Among 38 and 34                           32
               Companies Affected by Timing Differences in 1986
               and 1987, Respectively
          Table 3.5: Number of Companies With High and Low                           33
               Worldwide Rates Before and After the Inclusion of
               Timing and Permanent Differences

Figures   Figure 1: Comparison of Average U.S. and Worldwide                           4
              Effective Tax Rates for Years 1980 Through 1983,
               1986, and 1987
          Figure 2.1: Comparison of Average U.S. and Worldwide                        20
               Effective Tax Rates for Years 1980 Through 1983,
               1986, and 1987
          Figure 2.2: Percent of Industries With U.S. Effective Tax                   24
               Rates Above 40 Percent and Below 10 Percent in
               1986
          Figure 2.3: Percent of Industries With U.S. Effective Tax                   25
               Rates Above 40 Percent and Below 10 Percent in
               1987
          Figure 2.4: Percent of Companies With U.S. Effective Tax                    26
               Rates Above 40 Percent and Below 10 Percent in
               1986




          Page 9                                      GAO/GGB9989     Effective Tax Bates
content.9




Figure 2.5: Percent of Companies With US. Effective Tax                27
    Rates Above 40 Percent and Below 10 Percent in
     1987




Abbreviations

,JCT        Joint Committee on Taxation
TRA         Tax Reform Act of 1986


Page 10                                    GAO/GGD9O-O9 EXfective Tax Rates
Page 11   GAO/GGB9069 Effective Tax Rates
Chapter 1

Introduction


               Over the past several decades, various tax incentives have been added
               to the tax code enabling companies to lower their taxable income and,
               thus, lower their tax liability. For example, to encourage investment in
               equipment and plant modernization, Congress in the early 196Os,
               approved the investment tax credit and accelerated depreciation. As a
               result, some of the Nation’s largest companies did not pay any taxes and
               a number of others have paid a rate far less than the statutory rate. For
               instance, in 1988, Citizens for Tax Justice reported that between 1981
               and 1985,40 of 250 companies surveyed paid no federal income taxes.
               These 40 companies had combined profits of $43.7 billion.

               One indicator of the amount of taxes being paid by U.S. companies is the
               effective tax rate. There are two types of effective tax rates: marginal’
               and average. Average effective tax rates are measures of income taxes
               paid in relation to pretax income. In addition to indicating a company’s
               tax liability, effective tax rates are used by policymakers to determine
               the need for further changes to the Nation’s tax code. For instance, prior
               effective tax rate studies of the Joint Committee on Taxation (XT) dis-
               closed relatively low effective tax rates among the aerospace and con-
               struction industries. These industries had deferred large amounts of
               taxes by using the completed contract method of accounting. This
               method recognizes income only on completion or substantial completion
               of a contract. The JCT’S studies contributed to changes introduced by the
               Tax Reform Act (1’~) of 1986, including one which limited use of the
               completed contract method.

               Because of differences that arise between generally accepted accounting
               principles and prevailing tax laws, a company’s income for financial
               reporting purposes and income for tax purposes during the same period
               will differ. This disparity primarily results from timing and permanent
               differences.

               Timing differences result from financial transactions that are recognized
               for tax purposes in different accounting periods than for financial
               reporting purposes. Timing differences originating in a given period
               always reverse themselves in one or more future periods. For example,
               installment sales may generally be reported for tax purposes as revenue
               is collected, but, for financial reporting purposes the total income from
               the installment sale is recognized in the period the sale is made. Thus,
               collections on the installment sale are recognized for tax purposes in 2 or

               lMarginal effective tax rates take into accountthe timing of incomeand deductionsfrom incomeby
               comparingthe presentvalue of futrm taxes with the additional incomefrom new investments



               Page 12                                                    GAO/GGLWM9       Effective Tax Rates
                       Chapter 1
                       introduction




                       more years, while the entire amount is recognized for financial reporting
                       purposes in the year of sale. While some timing differences reduce
                       income taxes that would otherwise have to be paid in the current period,
                       other timing differences may increase income taxes in the current
                       period. Further, some timing differences may reverse within 1 year and
                       are referred to as short-term, while others may take several years to
                       reverse and are referred to as long-term. Timing differences are com-
                       monly referred to as deferred tax expense or benefit and are considered
                       as such throughout this report. Deferred tax expense represents a tax
                       liability postponed for future payment, whereas a deferred tax benefit
                       represents a tax credit or deduction delayed for future recognition.

                       Differences between income for tax purposes and income for financial
                       reporting purposes that never reverse themselves in subsequent periods
                       are called permanent. Permanent differences result from tax laws that
                       make certain financial transactions nontaxable, nondeductible, or sub-
                       ject to special tax allowances. Since permanent differences do not affect
                       subsequent periods, no interperiod tax allocation is made to account for
                       them. For example, proceeds from life insurance carried by a company
                        for key officers or employees are recognized for financial reporting pur-
                       poses but not for tax purposes. Fines or expenses resulting from a viola-
                        tion of law are recognized for financial reporting purposes but are not
                        deductible for tax purposes. Under a special tax provision referred to as
                        a net operating loss deduction, a company can elect to carry a net oper-
                        ating loss back 3 years and receive a refund of taxes paid in those years
                        or carry the loss forward and offset future taxable income for up to 15
                        years. Because of the existence of financial transactions that cause tim -
                        ing and permanent differences in the amount of income subject to taxa-
                        tion, a company’s effective tax rate may not equal the statutory tax rate
                        provided in the Internal Revenue Code.

                                              -_
                        In computing effective tax rates using financial statements, various
Differing Approaches    alternatives exist for the treatment of deferred tax expense and bene-
in Computing            fits. One approach is to use only income taxes currently payable in com-
Effective Tax Rates     puting rates. A second approach is to include all income taxes, amounts
                        currently payable and deferred, in computing rates. A third approach is
                        to determine the amount of deferred tax expense or benefits expected to
                        result in actual tax payments or refunds within the near future (i.e.,
                        short-term deferred) and net them with taxes currently payable to com-
                        pute rates. Each of these approaches will yield a different effective tax
                        rate. Rates will generally be higher by including some or all of the
                        deferred tax expense and lower by including some or all of the deferred


                        Page 13                                      GAO/GGD90-69 Effective Tax Rates
Chapter 1
Introduction




tax benefits. To be consistent with the methodology of the JCT,   we   com-
puted rates by including only income taxes currently payable.

Citizens for Tax Justice, a public interest group that studies corporate
taxation, and the JCT advocate the exclusion of all deferred taxes from
effective tax rate computations on the premise that deferred taxes do
not reflect income taxes currently paid. For example, as long as a com-
pany continues to grow, it will likely generate additional deferred taxes,
which, in the aggregate, will offset the effect of previously deferred
taxes. The net result is an indefinite deferral of previously recorded tax
liabilities.

Among those advocating the inclusion of all deferred taxes in computing
rates is the Institute for Research on the Economics of Taxation. The
Institute is a nonprofit, tax-exempt research and educational organiza-
tion that does corporate tax studies. Its position is that a deferred tax is
a postponed tax rather than one that is permanently excused. It is a
liability or obligation that must be paid at some time in the future. By
excluding deferred taxes from effective tax rate computations, the Insti-
tute believes that deferred taxes are treated as “no taxes.”

Tax Analysts, a tax research group, published rates computed using
income taxes currently payable and only those deferred tax expenses or
benefits expected to result in actual tax payments or refunds within the
foreseeable future. They believe that the remaining deferred tax
expenses or benefits will generally not be recognized in the foreseeable
future and, thus, should not be included in computing rates. Critics of
Tax Analysts’ approach agree that computing rates using both income
taxes currently payable and “short-term” deferred tax expenses or ben-
efits gives some recognition to those timing differences that will result
in tax payments or refunds in the foreseeable future. However, these
critics believe that determining when timing differences will reverse
cannot be predicted with certainty.

Table 1.1 illustrates the differences in computed effective tax rates
when using each of the three approaches. In this example, when only
taxes currently payable are included in the computation, the effective
tax rate is 20 percent. However, when all the deferred tax expense is
included, the rate increases to 40 percent.




 Page 14                                       GAO/GGB9@69 Effective Tax Rates
                                           Chapter 1
                                           Introduction




Table 1.1: Effective Tax Rates Under
Differing Computation Methods                                                                    Rates Computed Including
                                                                                    Taxes                Current and         Current and
                                                                                 currently                short-term                  all
                                                                                  payable             deferred taxes      deferred taxes
                                           -
                                           Income Taxes Currently
                                              Pavable                             $100.000                    $100,000                    $100,000
                                           Deferred Tax Expense.
                                              Short-Term                                     0                   50,000                      50,000
                                              Long-Term                                      0                        0                      50,000
                                           Total Income Tax
                                             Expense Divided by                  $100,000                    $150,000                     $200,000
                                           Pretax Income                          $500,000                    $500,000                     $500,000
                                           Equals Effective Tax Rate                    20%                           30%                        40%

                                           Note For illustrative purposes, we did not include the effect of deferred tax credits on effective tax
                                           rates The inclusion of deferred tax credits !n the above example would result ID a lower effective tax
                                           rate



                                            In October 1988, Congressmen Don J. Pease and Byron L. Dorgan
Objectives, Scope, and                      requested that we review the overall domestic and worldwide tax bur-
Methodology                                 dens of large U.S. companies for 1986 and 1987. In response to this
                                            request, we (1) computed U.S., foreign, and worldwide effective tax
                                            rates for 237 large U.S. companies-220 companies each in 1986 and
                                            1987-and (2) analyzed reasons for particularly high and low effective
                                            tax rates by companies and industry groups.

                                       -
Computation of Effective                    To address the objective of computing company and industry effective
                                            tax rates, we first identified the companies included in the XT’S 1983
Tax Rates                                   and 1984 studies. To ensure consistency with these earlier studies, we
                                            included the same companies in our study to the extent that they met
                                            the following criteria in 1986 and 1987:

                                            They had not changed industries.
                                            They were still listed on the Fortune 500 Industrial or the Fortune Ser-
                                            vice 500 Directory.
                                            Financial statements either contained information required to compute
                                            effective tax rates, or such information could be obtained by telephone
                                            contacts with company officials.

                                               Because some of the companies had either dropped from the Fortune
                                               500 lists, changed industries, or did not report in their financial state-
                                               ments information needed to compute rates, we substituted 27 and 37



                                               Page 15                                                       GAO/GGD-9089Effective Tax Rates
    Chapter 1
    Introduction




    companies, respectively, in 1986 and 1987. Of the 220 companies (repre-
    senting 29 industries) in our study of 1986 and 1987 rates, 193 and 183,
    respectively, were included in the XT’S 1983 and 1984 studies. Because
    of these substitutions, a total of 237 companies were included in our
    study.

    To comply with the request and to compare rates to those in prior stud-
    ies, we computed rates by comparing income taxes currently payable to
    pretax income as reported in the financial statements.? In comparing
    income taxes currently payable to pretax income, adjustments consis-
    tent with the ET’S methodology were made to reported net income and
    income taxes currently payable. Net income as disclosed in the financial
    statements was adjusted to

. include income or loss attributable to that portion of a subsidiary’s com-
  mon stock interest belonging to minority stockholders,
. eliminate income or loss attributable to the parent company’s equity in
  affiliates or joint ventures,
. exclude profit or loss from extraordinary items and discontinued opera-
  tions, and
. exclude the current portion of state and local income tax expense.

     Income taxes currently payable were adjusted to exclude

. current tax expense (or savings) attributable to extraordinary items or
  discontinued operations and
. the current portion of state and local income tax expense.

     Appendix I presents a more detailed discussion of the adjustments
     made.

     To compute effective tax rates for 1986 and 1987, we identified and
     allocated between U.S. and foreign operations the adjusted worldwide
     pretax income and income taxes currently payable for each company.
     For companies with no foreign operations, U.S. and worldwide income
     and taxes were identical. We computed US. and worldwide effective tax
     rates for each company by dividing adjusted US. and worldwide income
     taxes currently payable by adjusted US. and worldwide pretax income.
     Foreign effective tax rates were computed by dividing foreign income

     “Another approachwould have beento computeeffective tax ratesfrom tax returns by matchingthe
     taxes paid with the incomeon which the tax was imposed.Useof this approachcan result in rates
     that differ from effecrne tin ratescomputedfrom financial statements.



     Page 16                                                  GAO/GGD9969 Effective Tax Rates
                           Chapter 1
                           introduction




                           taxes currently payable by foreign pretax income. Similarly, we com-
                           puted U.S., foreign, and worldwide effective tax rates for each industry
                           by dividing aggregate U.S., foreign, and worldwide income taxes cur-
                           rently payable by aggregate U.S., foreign, and worldwide pretax income,
                           respectively. Further, we computed 1986 and 1987 average U.S., for-
                           eign, and worldwide effective tax rates for the 220 companies by divid-
                           ing the aggregate U.S., foreign, and worldwide income taxes currently
                           payable by the aggregate U.S., foreign, and worldwide pretax income.
                           When data elements necessary to compute rates were not available from
                           the financial statements, we contacted company officials by telephone to
                           obtain the information.

                           In some circumstances, the effective tax rate may be distorted because
                           the sign (positive or negative) of the rate misrepresents the underlying
                           situation. If the company reports income and pays taxes, then its situa-
                           tion is not misrepresented and the sign of the rate is positive. Also, if a
                           company reports income and receives a refund (negative taxes), then its
                           effective tax rate is correctly portrayed as negative. However, if a com-
                           pany suffers a book loss (negative income) and receives a refund (nega-
                           tive taxes), the sign of its effective tax rate is positive, even though the
                           company did not pay taxes. We note when this occurs. We also note a
                           distorted rate when a company suffers a book loss (negative income)
                           and pays taxes (positive taxes). Here, the sign of the rate is negative
                           even though the company actually paid taxes.


Analysis of High and Low   To address the objective of analyzing reasons for high and low rates, we
                           used the ET'S criteria of below 10 percent as a low rate and anything
Rates                      above the statutory rate (46 percent in 1986” and 40 percent in 19871 )
                           as a high rate. Using these criteria, we identified 131 companies with
                           either high or low U.S. rates in 1986 and/or 1987. For these 131 compa-
                           nies, we determined the impact of timing differences on these rates. We
                           classified the items contributing to timing differences as short-term or
                           long-term deferred tax expense and benefits. We classified as long-term
                           those tax deferrals that would not likely be paid or refunded for at least
                           1 year (e.g., accelerated depreciation, intangible drilling costs, install-
                           ment sales, leasing transactions, and long-term contracts, among others).
                           Those deferred tax itthms not classified as long-term were categorized as

                            “For a comparison
                                           of 19Miand 1987industry and companyrates,we used40 percentin figs. 2.2, 2.3,
                            2.4, and 2.5.

                            “The 1987rate of 40 petwnt representsthe averagerate for compares with a December31,1987,
                            year-end.The tax rate rbangrd frum 46 percentto 34 percenton duly 1, 1987



                            Page 17                                                 GAO/GGD-90-69 Effective Tax Rates
Chapter 1
htKulleion




short-term. We then combined short-term deferrals (i.e., deferred tax
expenses and benefits expected to reverse or result in cash payments or
refunds within 1 year) with income taxes currently payable to deter-
mine the effect of their inclusion on U.S., foreign, and worldwide rates.
We also determined the impact of long-term deferrals on rates.

We were unable to determine the effect of permanent differences on
high and low U.S. company rates because financial statements did not
identify permanent differences attributable exclusively to U.S. opera-
tions. However, we did determine the effect of permanent differences on
high and low worldwide rates. Permanent differences are generally non-
taxable or nondeductible and include such items as proceeds from life
insurance on officers, fines or expenses resulting from a violation of
law, and nondeductible losses.

We contacted tax officials at all 237 companies to request their com-
ments on the rates we computed. We also requested company comments
on our analysis of factors contributing to high and/or low U.S. rates.
When the companies provided information that had a material effect on
the rates we had previously computed, corrections were made to our
analysis, Appendix II provides details on company responses by cate-
gory, as well as our response.

We did our work between January and September 1989, in accordance
with generally accepted government auditing standards.




Page 18                                      GAO/GGD-9949 Effective Tax Rates
Chapter 2

Comparison of Effective Tax Rates


                       Our analysis of company effective tax rates showed average 1987 U.S.
                       and worldwide rates to be higher than comparable rates in 1986 and in
                       prior studies of the Joint Committee on Taxation. Additionally, our anal-
                       ysis of U.S. and worldwide effective tax rates showed that 1987 indus-
                       try rates were generally higher than 1986 and 1980 through 1983
                       averages. While the finding of higher 1987 rates is consistent with the
                       expected effects of the corporate base-broadening changes introduced in
                       the 1986 Tax Reform Act, it is only a snapshot in time. Analysis of addi-
                       tional years beyond 1987 would be necessary to do a comprehensive
                       evaluation of TM’s effect. This is especially true for some companies
                       that experienced widely fluctuating rates between 1986 and 1987.


                       A comparison of the average U.S. and worldwide rates for the compa-
Average 1987 Rates     nies included in this study showed 1987 rates to be higher than rates in
for Companies in Our   1986 and ;980 through 1983. The average US. rate was about 28 per-
Study Were Higher      cent in 1987, compared to average rates ranging from about 16 to 22
                       percent between 1980 and 1986. The average 1987 worldwide rate was
Than Rates in Prior    about 36 percent, compared to average rates ranging from about 28 to
Years                  34 percent between 1980 and 1986. Figure 2.1 illustrates the average
                       U.S. and worldwide effective tax rates for 1980 through 1983, 1986, and
                       1987.




                       Page 19                                      GAO/GGDSO8S Effective Tax Rates
                                                                        --
                                         Chapter 2
                                         Comparison of Effective Tax Rates




Figure 2.1: Comparison of Average U.S.
and Worldwide Effective Tax Rates for
Years 1980 Through 1983,1986, and        50   Effective Tax Rates (%)
1987
                                         45



                                         35

                                         30

                                         25

                                         20

                                         15

                                         10

                                          5

                                          0




                                               )        U.S.
                                                        Worldwide



                                          Note The average &es are not e.wtly comparable because of varlatlons In companies Included in the
                                          computations for some years It IS unlikely, however, that the varlatlons result In any slgnlficant change
                                          m average rates



                                          Our analysis of U.S. and worldwide effective tax rates by industry
 1987 Industry Rates                      showed 1987 rates to be generally higher than 1986 and 1980 through
 Generally Higher Than                    1983 industry averages. Of the 29 industries in our study, 16 included
 Those in Prior Years                     most of the same companies and had rates computed for the 4 years
                                          covered by prior studies of the Joint Committee on Taxation. Eleven of
                                          the 16 had 1987 LJ.S.effective tax rates that were higher than the 1986
                                          and 1980 through 1983 industry averages. For example, the U.S. rate
                                          for the aerospace industry was 30.1 percent for 1987, compared to a 9.7-
                                          percent 1980 through 1983 industry average. The comparable 1986 rate
                                          was 15.9 percent.. Table 2.1 presents the U.S. effective tax rates by
                                          industry, as well as the average for all companies, for the years 1980
                                          through 1983, 19)86,and 1987. See appendix III for worldwide effective
                                          tax rates.



                                          Page 20                                                          GAO/GGD9069 Effective Tax Rates
                                           Chapter 2
                                           Comparison of Effective Tax Rates




Table 2.1: Comparison of U.S. Effective
Tax Rates by Industry for the Years 1960                                               Effective tax rates expressed as a percenr
Through 1963,1966, and 1967                                                                         JCT
                                                                                                                    1960-
                                                                                                                     1983     GAO
                                           Industry                                 1960 1961 1962 1963 Average 1966 1967
                                           Aerospace                                 16.4      6.8   (0.6) 14.0           9.7     15.9                   301
                                           Beverages                                 28.0    28.8    20 5   18.7         23.2     21.6                   37 7
                                                                                            ..__~__~.__~_~.___
                                           Broadcasting                                   b        b   8.9  18.5              t’ 32.1                    29.3
                                           Chemicals    -__                          13.7      5.0 (17 7)    (1 0)        36      13.5                   36.8
                                                                       -           __~__
                                           Computers and offlce equipment            249      25.3   264    263          25.8  ~-~-(0.6)                 124
                                           Construction                                   b        b 15.9     0.7             b (201.5)”                (36 5)
                                           __~
                                           Electronics and appliances                24 5     17.1   14.3     7.4        16.2     29.2                   32.0
                                           Financial lnstltutions                     5.8      2.7    (3.8)   64          38        8.6                 166.7d
                                                                                                                   ..______
                                           Food processors                           35.6     26.8   31 6   25 9         29 5     32.4                   37.5
                                           Glass, concrete, abrawes.        and
                                           gypsum                                            b          b          e   175                   b   39.0    35.5
                                           Instrument companies                       37 1       26.6       21.9       32.8           29.5       354     34.8
                                           Investment   companies                            b          b   21.3        93                   b   277     14.1
                                           Metal manufacturing                        15.3       10.2              e           B           e (2.8)c     (19.3)
                                           Metal products                                    b          b   30.2        15.1               b   0.3       46.5”
                                                                                                                        ~~_~.__.
                                           Mining                                            b          b          e         e             b 43.2        36 1
                                           Motor vehicles                                    b          b          e     3.5               b (184)        39
                                            Paper
                                           ~~   . and wood products                   (1.4) (14.2)          36.1        (0 5)          (2.9) 11.5
                                                                                                                                               -~-~      17.2
                                            Petroleum’                                31.1   21.7           182         21.3          23.5 (76.2)            9
                                            Pharmaceuticals                           392    35.9           32.7        27.2          32.9    35.7       28.0
                                            RetaIlIng                                 34 1   22.3           20.4        20.0          22.9    292        46.1
                                                                                                                          __       __.~~_~
                                           ~Rubber
                                               .~...                                       b      b         39.0        19.6                b 226        19.0
                                            Soaps and cosmetics                            b      h         333         35 6               b 26.1        45.8
                                           Telecommunlcatrons                              b      b          16          48                 b 25 7       28.3
                                           Tobacco                                    31.4       31 3       36.3        33 8          33.3       30.0    28 1
                                           Transportation.
                                              Airlines                                 3.0            e          f             e          e (43.5)       25.74
                                              Railroads                               10.7       (7.5)       4 1         3.3 ,~.-~-- 2.4 (l13.2)c        15.6
                                              Trucking                                375        46 1       36.9        34.5         38.2    284         307
                                            Utlllties (electric and gas)”             109        103        156          71           10.7
                                                                                                                                        ~____.14.7       180
                                            Wholesalers                                      b          b   36.1       34.8-               b 37 3        39.5
                                            Average                                   21.8       17.2       16.1        167                   18.6       27.8
                                            aA slmrlar effective tax rate study was not done for tax year 1985 The study for tax year 1984 was not
                                            published
                                            “The 1980 and 1981 rates are not available, the 1980-1983 average was not computed




                                            Page 21                                                                GAO/GGD90-69 Effective Tax Rates
chapter 2
Comparison
        of Effective Tax Rates




CRate shown IS arlthmetlcally dlstorted due to a book loss. A book loss causes the sign of the effective
tax rate to be negative (benefit) when a tax IS pald or posItwe (expense) when a tax benefit is received,
lust the opposite of what the sign should be

%?e explanation of difference between 1986 and 1987 rates on page ‘22
eJCT did not report rates on book losses 11the Industry experienced an aggregate book loss and &her
a refund was due or a tax was pald

‘Some compames included I” the 1982 and 1983 studies were classlfled wth crude 011productlon in
1980and1981

sThe effective tax rate exclusw? of Texaco IS 23 9 percent If Texaco IS Included. the rate rises to 121 3
percent See the explanation on page 22

% 1980 and 1981, the utllltles group Included AT&T and GTE The 1980 and 1981 utll,tvas rate IS
restated to Include only electnc and gas utllitles


As shown in table 2.1, four industries with undistorted rates-airline
transportation, financial institutions, metal products, and petroleum-
experienced relatively wide swings in U.S. rates between 1986 and 1987.
Specifically, airline transportation’s rate rose from negative 43.5 per-
cent to 25.7 percent between 1986 and 1987. In 1986, one company
received a refund as a result of investment tax credit carrybacks.
Another company received a credit for contributions made to its payroll-
based stock option plan. Further, several companies within the industry
incurred book losses that. resulted in a tax benefit.

The financial institutions’ rate increased from 8.6 percent in 1986 to
166.7 percent in 1987. In 1986, several companies received refunds or
credits while several others incurred book losses and either paid no
taxes or recorded a tax benefit. In 1987, several companies paid taxes
despite book losses and one company paid a relatively large amount of
taxes on a small amount of income.

 Also, rates for metal products increased from 0.3 percent in 1986 to 46.5
 percent in 1987. This difference is attributable to one of the companies
 in the industry receiving a large refund of US. taxes in 1986, which
 made the aggregate amount of IJS. taxes paid by companies in the
 industry small when compared to 1987.

 The rate for petroleum was a negative 76.2 percent in 1986 since a
 number of companies reported tax credits or refunds in that year. The
 rate for 1987 depends substantially on whether one company is included
 or not.’ Without this company the effective rate is 23.9 percent, but
 including this company raises the rate to 121.3 percent.

 ‘This companyreporteda largr bocrklossbut did not cowlder the settlementof a lawsuit.to be an
 extraordinary loss for tht%pr~r-posr
                                   of its financial statement.



 Page 22                                                           GAO/GGLW949Effective Tax Rates
Chapter 2
Comparison of Effective Tax Rates




Further analysis of the 29 industries showed that a higher proportion
had U.S. and worldwide rates exceeding 40 percent in 1987 than in
1986.2 Appendixes IV and V provide details on industry rates. Specifi-
cally, in 1986, only 1 of the 29 industries (mining) had a U.S. effective
tax rate over 40 percent, while in 1987,5 of the 29 industries had U.S.
effective tax rates over 40 percent. The five industries are (1) financial
institutions, (2) metal products, (3) petroleum, (4) retailing, and (5)
soaps and cosmetics.

Worldwide rates for this same period showed a similar trend. Specifi-
cally, in 1986, 4 of 29 industries (construction, metal products, mining,
and rubber) had worldwide effective tax rates over 40 percent, while in
1987, 6 of 29 industries had worldwide effective tax rates over 40 per-
cent. The six industries are (1) chemicals, (2) mining, (3) petroleum, (4)
retailing, (5) soaps and cosmetics, and (6) wholesalers.

While the number of industries with worldwide rates below 10 percent
did not vary between 1986 and 1987, fewer industries had U.S. rates
below 10 percent in 1987 than in 1986. In 1986, six industries had U.S.
effective tax rates less than 10 percent.” The six industries are (1) air-
line transportation, (2) computers and office equipment, (3) financial
institutions, (4) metal products, (5) motor vehicles, and (6) petroleum. In
1987, only 2 of the 29 industries (motor vehicles and metal manufactur-
ing) had U.S. rates below 10 percent.4 Figures 2.2 and 2.3 show the per-
cent of industries with 17,s.effective tax rates above 40 percent and
below 10 percent for 1986 and 1987.




‘Sincethe statutory rate differed in 1986and 1987,we usedthe 1987statutory tax rate of 40 percent
in our analysis.
3Theconstruction,metal manufacturing,and railroad transportationindustriesalso had rates less
than 10 percent;however,the rateswere distorted.The rates were negativebecausethe industry as a
whole recordeda booklossbut paid taxes.
‘The constructionindustry alsohad a rate les than 10 percent;however,the rate was distorted.The
rate was negativebecauwthe industry as a whole recordeda book lossbut paid taxes.



 Page 23                                                   GAO/GGLHMB9 Effective Tax Rates
                                         Chapter 2
                                         Comparison of Effective Tax Rates




Figure 2.2: Percent of Industries With
U.S. Effective Tax Rates Above 40
Percent and Below 10 Percent in 1966




                                                                                              Rates c 10%




                                                             A                                Rates of l&40%

                                         Percentages are based on fates ior 29 mdusirles Three mdustrm had dIstorted rates below 10 percent
                                         due lo a book loss and a tax payment or refund




                                         Page 24                                                      GAO,‘GGD-99-69 Effective Tax Rates
                                         Chapter 2
                                         Comparison
                                                 of Effective      Tax Rates




Figure 2.3: Percent of Industries With
U.S. Effective Tax Rates Above 40
Percent and Below 10 Percent in 1997




                                                                                               6.9%
                                                                                               Rates< 10%




                                                                                               Ratesof   lo-40%




                                         Percentages are based on rates for 29 mdustries One Industry had a distorted rate below 10 percent
                                         due to a book loss and a tax payment or refund


                      Our analysis showed that 1987 U.S. and worldwide effective tax rates
1987 Company Rates    generally exceeded comparable rates for 1986 on a company, as well as
Generally Higher Than industry, basis. Figures 2.4 and 2.5 show that the percent of companies
1986 Rates            with U.S. effective tax rates below 10 percent dropped from 28 percent
                                         (62 companies) in 1986 to about 19 percent (41 companies) in 1987.
                                         These figures also illustrate that more companies had effective tax rates
                                         higher than 40 percent in 1987 than in 1986. The percent of companies
                                         with effective tax rates higher than 40 percent rose from 12 percent (26
                                         companies) in 1986 to 20 percent (44 companies) in 1987. Appendixes
                                         VI and VII show 1986 and 1987 U.S. and worldwide effective tax rates,
                                         respectively, for the 220 companies included in each year of our study.




                                          Page 25                                                      GAO/GGD-9949 Effective Tax Rates
                                       Chapter 2
                                       Comparison of Effective Tax Rates




U.S. Effective Tax Rates Above 40
Percent and Below 10 Percent in 1988




                                                                                              Rates x 10%




                                                                                              Rates of 1O-40%




                                       Percentages are based on rates for 220 Industries. Of the 41 companies wth dIstorted rates due to a
                                       book icassand a tax payment or refund, 37 had rates below 10 percent, 1 had a rate above 40 percent
                                       and 3 had rates between 10 and 40 percent




                                       Page 26                                                        GAO/GGB99439 Effective Tax Rates
                                         Chapter 2
                                         Comparison of Effective Tax R&es




Figure 2.5: Percent of Companies With
U.S. Effective Tax Rates Above 40
Percent and Below 10 Percent in 1997
                                                                                                Rates > 40%

                                                                                                Distorted Rates



                                                                                                Rates c 10%




                                                                                                Rates of 1 O-40%




                                          Percentages are based on rates for 220 companies Of the 33 companies wth rates distorted due to a
                                          book loss and a tax payment or refund, 26 had rates below 10 percent, 4 had rates above 40 percent,
                                          and 3 had rates between 10 and 40 percent


                                          A comparison of U.S. and worldwide average effective tax rates for
Increased 1987 Rates                      1986 and 1987 showed 1987 rates to be higher. This increase seems con-
Consistent W ith                          sistent with the expectation of how the changes introduced by TRA
Changes Introduced                        would affect corporate taxation. However, a comprehensrve analysis of
                                          TM’S effect should be on the basis of more than 1 year of data because
by the Tax Reform Act                     effective tax rates for particular companies can fluctuate widely from
of 1986                                   year to year. Also, studies that approach effective tax rates from a dif-
                                          ferent perspective should be considered, such as those that evaluate
                                          how taxes change when additional income is earned or when new
                                          investments are made by the company.

                                          TRA eliminated many tax benefits, thereby increasing the base of taxable
                                          income and the resulting effective tax rates. Selected changes that have
                                          increased the base of taxable income and, thus, increased taxes follow?

                                        . Elimination of the lower rate on long-term capital gains

                                          ‘Tax legislationenactedsubsequentto the 1986act includedalterationsof theseand other tax
                                          provisionsthat would affect I he taxableincomebase.




                                          Page 27                                                        GAO/GGB90-69 Effective Tax Rates
                 Chapter 2
                 Comparison of Effective Tax Rates




             -
               Elimination of the investment tax credit and reduction of the investment
               tax credit carryforward
               Adoption of longer depreciation periods for personal and real property
               Adoption of a new corporate alternative minimum tax system
               Allocation of a portion of indirect costs to inventory or capital account
               rather than expense in the year incurred
               Repeal of the reserve method of computing the deduction for bad debts
               Replacement of the completed contract method of accounting for long-
               term contracts with a method that requires a portion of contract income
               and cost to be reported using the percentage-of-completion method
             . Accelerated recognition of installment gain for sales of inventory and
               business or rental real estate based on the taxpayer’s debt-to-asset ratio
               and repeal of the installment method for sales pursuant to revolving
               credit plans and sales of publicly traded property
             . Imposition of additional separate foreign tax credit limitations on cate-
               gories of foreign income


                 Our analysis of 1986 and 1987 effective tax rates showed 1987 rates to
Conclusion       be generally higher than rates in prior years for the companies and
                 industries we examined. Our analysis also showed that, in the aggregate,
                 these companies and industries paid more taxes in 1987 than in 1986.
                 While no direct cause-effect relationship can be established, the
                 increased 1987 rates seem consistent with expectations of how changes
                 introduced by the 1986 TRAwould affect the corporate sector. More than
                 1 year of data would be needed, however, to do a comprehensive analy-
                 sis of TRA's effect.




                  Page 28                                    GAO/GGB99-69 Effective Tax Rates
Chapter 3
  -.     .
Tmmg and Perrnanent Differences Contributed
to High and Low Effective Tax Rates

                                            As discussed in chapter 1, different methodologies can be used in calcu-
                                            lating effective tax rates. To be consistent with prior Joint Committee
                                            reports on effective tax rates, we used a methodology that excluded tim-
                                            ing and permanent differences. In analyzing the reasons for particularly
                                            low and high effective tax rates, we recomputed rates by including tim-
                                            ing and permanent differences. We considered only industries and com-
                                            panies with undistorted rates and used the statutory rate of 46 percent
                                            in 1986 and 40 percent in 1987 as the high rates in our analysis. When
                                            these differences were taken into account, the number of industries and
                                            companies with high and low rates in 1986 and 1987 decreased
                                            substantially.


                                            Timing differences result from financial transactions (revenues or
Effect of Timing                            expenses) that are recognized for financial statement purposes in one
Differences on U.S.                         reporting period but are recognized for tax return purposes in another
Rates by Industry                           period. As a result, income tax payments or credits are deferred until
                                            revenue or expense recognition occurs. When deferrals were included in
                                            the computation of effective tax rates, the number of industries with
                                            high or low rates in 1986 and 1987 decreased.

                                            Table 3.1 shows that after recomputing rates including tax expenses or
                                            benefits resulting from timing differences with taxes currently payable,
                                            we found that the number of industries with undistorted high or low
                                            U.S. rates decreased from six to four in 1986. Similarly, the number of
                                            industries with high or low 1987 U.S. rates decreased from seven to five
                                            with the inclusion of timing differences.

Table 3.1: Number of Industries With
High and Low U.S. Rates Before and                                                     Before timing         After timing
After the Inclusion of Timing Differences   Year                   U.S. rate             differences         differences
                                            1986                   High                           0
                                                                                               ___-___-                  2
                                                                   Low         __.__               6                     2
                                                                   Total                           6                     4
                                            I 987                  High                            5                     3
                                                                   Low                             2                     2
                                                                   Total                           7                     5


                                            Table 3.2 shows the extent that rates for industries with undistorted
                                            high and low U.S. rates in 1986 and/or 1987 changed after including
                                            deferred tax expense and benefits.




                                            Page 29                                       GAO/GOD9069 Effective Tax Rates
                                          Chapter 3
                                          Timing and Permanent Differences
                                          Contributed to High and Low Effective
                                          Tax Rates




Table 3.2: Effect of Timing Differences
on U.S. Effective Tax Rates by Industry                                             Excluding timing               Including timing
                                          lndustrv                                       differences                    differences
                                          1966:
                                          Comouters and office eaulDment                         (0.6)                          a.8
                                          Financial institutions                                  8.6                           23
                                          Metal products                                          0.3                          41.0
                                          Motor vehicles                                        (18.4)                         27 6
                                          Petroleum                                             (76.2)                         645
                                          _____         _-     -~                                 ____
                                          Airlines                                              (43 5)                         73 4
                                          1967:          ..~    ~~~
                                          FlnancB Institutions                                  1667                         (131 .O)
                                          Metal manufacturing                                   (19.3)                         (13.6)
                                                                        -~   ~___
                                          Metal oroducts                                         46.5                           49 7
                                          Motor vehicles                                          3.9                           29.5
                                          Petroleum                                             121.3
                                                          __-~~~                                                            __-129.8
                                          Retailing                                              46.1                           31.7
                                          Soap and cosmetics                                     45 a                           41 3


                                          In some cases, the relative change in tax rates resulting from the inclu-
                                          sion of timing differences was minimal. For example, the tax rate for the
                                          computer and office equipment industry remained low in 1986 because
                                          most of the industry income was derived from foreign operations and
                                          was subject to foreign taxes. The metal manufacturing industry’s rate
                                          remained low in 1987 because of the amount of tax credits, such as the
                                          investment tax credit and other refunds.

                                           The relative change in tax rates resulting from the inclusion of timing
                                           differences, such as the difference between the treatment of deprecia-
                                           tion for tax and financial statement purposes, i.e., accelerated versus
                                           straight-line depreciation, was considerable for other industries. The
                                           metal products industry rate for 1986 increased from 0.3 percent to 41.0
                                           percent primarily because of the inclusion of timing differences related
                                           to the use of accelerated depreciation, restructuring expense, and
                                           adjustments to facilities and operations. The motor vehicles industry
                                           rate increased in both years from a rate below IO percent to a rate
                                           between 10 and 40 percent primarily because of the inclusion of timing
                                           differences related to the use of accelerated depreciation and deferred
                                           compensation and employee benefits. The decrease from 167 percent to
                                           a negative 131 percent for the financial institutions industry in 1987
                                           was primarily because of deferred tax benefits related to provision for
                                           loan losses, leasing transactions, and unrecognized tax benefits. Other



                                           Page 30                                                  GAO/GGDOO69 Effective Tax Rates
                                            Chapter 3
                                            Timing and Permanent Differences
                                            Contributed to High and Cow Effective
                                            Tax Rates




                                            industry rates changed from a negative to a positive rate with the inclu-
                                            sion of timing differences. The petroleum industry rate increased consid-
                                            erably in 1986 from a negative 76.2 to 64.5 percent after including
                                            deferred tax expense. Accelerated depreciation and inventory valuation
                                            reserves were the predominant deferrals. The 1986 airline industry rate
                                            also changed considerably from a negative 43.5 to 73.4 percent. P cceler-
                                            ated depreciation, investment tax credits, and deferred gain on sale/
                                            leaseback were the predominant deferred tax expenses.


                                            We recalculated the effective tax rate for each company that had eithtr
Effect of Tim ing                           an undistorted high or low U.S. rate to determine the effect of timing
Differences on U.S.                         differences. Of 79 companies with 1986 rates above 46 percent or below
Rates by Company                            10 percent, data were available to recompute rates to include timing dif-
                                            ferences for 63 companies. Similarly, of 85 companies with 1987 rates
                                            above 40 percent or below 10 percent, data were available to recompute
                                            rates to include timing differences for 71 companies. Our analysis
                                            showed that the number of companies that had either high or low US.
                                            rates decreased substantially with the inclusion of timing differences.
                                            Predominant deferrals included items such as accelerated depreciation,
                                            the investment tax credit, state and local income taxes, and certain pen-
                                            sion costs.

                                            Table 3.3 shows that after recomputing rates including tax expense or
                                            benefits resulting from timing differences with taxes currently payable,
                                            we found that 38 of the 63 companies no longer met our criteria for high
                                            or low rates in 1986. Recomputing rates for the 71 high or low compa-
                                            nies in 1987, we found that 34 no longer met our criteria. Table 3.4
                                            shows the most common timing differences for these companies in 1986
                                            and 1987.

Table 3.3: Number of Companies With
High and Low U.S. Rates Before and                                                         Before timing          After timing
After the Inclusion of Timing Differences   Year                          U.S. rate          differences          differences
                                            1986                          High                        13                    IO
                                                                          Low                         50                    15
                                                                          Total                       63                    25
                                            1987                          High                        39                    24
                                                                          Low         --              32                    13
                                                                          Total                       71   .-               37




                                            Page 31                                           GAO/GGD9069 Effective Tax Rates
                                         Chapter 3
                                         Thing and Permanent Differences
                                         Contributed to High and Low Effective
                                         Tax Rates




Table 3.4: Predominant Deferrals Among
36 and 34 Companies Affected by Timing                                                                             Number of Companies
Differences in 1966 and 1967,                                                                                      1966                1967
Respectively                             Accelerated depreciation                                                     33                             24
                                         Investment tax credita                                                       19                              9
                                         State and local Income tax”                                                  18                             12
                                         Perwon       costs                                                           17                             12
                                         Long-term contracts                                                           8                              8
                                         hanqible drllllnq costs -                                                     8                              4
                                         Installment sales                                                              7                             9
                                         Leasing transacttons                                                           7                             7
                                         Employee compensation costs                                                    6                             7
                                         ?apMized interest       --                                                     5                             4
                                         Net ooeratlno loss carrvforwardsC                                              5                             3
                                         Accruals not currently deductible for taxes                                    5                             8
                                         Retlremeni and restructunna of debt                                          -4                              3
                                         Inventory valuatlor+                                                           3                             6
                                         Domestlc international sales?                                                     .                          4
                                                                                                                                                     .-
                                         Gain/Loss on equipment                                                            .                          3
                                         Unbilled revenue                                                                  .                          3
                                         Interest     income/loan   fees                                                   .                          3
                                                                                                                                  ..-
                                         ProvIsIon for write-down of assets                                                .                          3

                                         Note. Because a company may ha\e several tlmlng differences. the numbers in each year should not be
                                         added

                                         aThe mvestment tax credlt, deducted dltectly from taxes payable, was ellmmated I” the Tax Reform Act
                                         of 1986, effective January 1, 1966

                                         %aie       and local mccme taxes that are not currently payable but expected to coma due I” future years
                                         ‘A net operating loss offsets taxable income of prior or subsequent years

                                         dThese are ad@ments         made to ~nuentory, as reported I” flnanclal statements, for computing taxable
                                         Income

                                         eA domestic corporation whose income IS dewed predominantly from export sales and rental and
                                         meets certain other requirements IS not subject to taxation Companies that own shares in these corpo-
                                         rations are allowed to defer a lImited amount of taxes



                                         The exclusion of permanent differences in computing effective tax rates
Effect of Permanent                      also causes rates to differ from the statutory rate. Permanent differ-
Differences on                           ences are financial transactions recognized for either tax purposes or
Effective Tax Rates                      financial reporting purposes but not both. These differences result from
                                         tax laws that make certain financial transactions permanently nontax-
                                         able, nondeductible, or sub.ject to special tax allowances. While perma-
                                         nent differences may have contributed in part to continued high and low



                                         Page 32                                                            GAO/GGD9089 Effective Tax Rates
                                        chapter3
                                        TimingandPermanent  Differences
                                        Contributedto HighandLowEffective
                                        Tax Rates




                                        U.S. rates, after considering timing differences, we were unable to deter-
                                        mine their effect because financial statements identified permanent dif-
                                        ferences on a worldwide basis rather than by U.S. and foreign
                                        operations. However, we were able to determine the effect of permanent
                                        and timing differences on worldwide effective tax rates. We found that
                                        the number of industries and companies with high and low worldwide
                                        rates decreased with the inclusion of timing differences and decreased
                                        further with the inclusion of permanent differences.

                                        Table 3.5 shows that timing and permanent differences significantly
                                        affected companies with high and low worldwide rates in 1986 and
                                        1987. The number of companies with high or low undistorted worldwide
                                        rates decreased from 64 to 17 in 1986 and from 80 to 23 in 1987.

Table 3.5: Number of Companies With
High and Low Worldwide Rates Before                                                                                      After timing and
and After the Inclusion of Timing and                  Worldwide             Before timing             After timing            permanent
Permanent Differences                   Year           rate                   differences              differences            differences
                                        1966           High                               27                      19                      IO
                                        --Low                      ~~                     37                       9                      7
                                                       Total                              64                      28                     17
                                        1987           Hlah                                55                     29                     20
                                                       Low                                 25                      6                      3
                                                       Total                              80                      35                     23
                                        Note We could not Include three cornpaws wth high or low rates I” our analysts because data were not
                                        available on thew flnanclal statements to include tim!ng and permanent differences.


                                        Some industries and companies continued to have high and low world-
                                        wide effective rates even after accounting for timing and permanent dif-
                                        ferencesl In many cases, this resulted from the adjustments we made to
                                        income taxes currently payable and pretax income. Appendix I
                                        describes these adjustments in detail.


                                         The exclusion of timing and permanent differences contributes to low
Conclusion                               and high effective tax rates. When included, timing and permanent dif-
                                         ferences reduced the number of companies and industries with high or
                                         low rates. For example, with the inclusion of timing and permanent dif-
                                         ferences, the worldwide rates for more than one-half of the companies
                                         with low rates rose to above 10 percent. Legislative changes designed to

                                         ‘Although not shown in tabular form, we found that with the inclusionof timing and permanent
                                         differences,the numberof industrieswith high or low worldwide ratesdecreased from six to four in
                                         1986and from sevento two in 1987.



                                         Page33                                                       GAO/GGIHNM9
                                                                                                                EffectiveTax Rates
chapter3
Timing and Permanent Differences
Contributed to High and Low Effective
Tax Rates




limit or eliminate specific timing and permanent differences would likely
result in an increase in current tax revenue.




Page 34                             I_   ,..-.-,..   GAO/GGB9O+9 Effective Tax Rates
Page 36   GAO/GGD90.69 Effective Tax Rates
Appendix

Scopeand Methodology for Computing
Effective Tax Rates

                          This appendix describes how we selected our sample and how we com-
                          puted various effective tax rates for the companies and industry groups.


                          The companies for which we computed 1986 and 1987 effective tax
Methodology for           rates were, to the extent possible, selected from among those included in
Selecting Companies       earlier JCT studies. We used a list of 220 companies, 217 from JCT'S
                          unpublished 1984 study and 3 from its 1983 study. We relied primarily
                          on the 1984 study since it was the most recent study.

                          The companies in our 1986/1987 analyses were included in prior JCT
                          studies to the extent that they met the following three criteria:

                      . They were listed on the Fortune 500 Industrial or the Fortune Service
                        500 lists for years 1986 and 1987.
                      . The industry classification was the same in 1986 and/or 1987 as in
                        1984.
                      . Data were available to compute effective tax rates.

                          If a company did not meet these criteria, we chose the next highest
                          ranked Fortune 500 company from the same industry as the company
                          being replaced. This allowed for comparability between 1986/1987 and
                          earlier studies.

                          To ensure that companies met the first criteria, we matched our list of
                          companies against Fortune magazine’s Industrial and Service lists for
                          1986 and 1987. We made substitutions for 13 and 23 companies, respec-
                          tively, in 1986 and 1987, because the companies did not appear on the
                          lists in those years.

                          To ensure that companies met the second criteria, we matched a com-
                          pany’s industry classification according to JCT against Fortune maga-
                          zine’s classification for the years 1986 and 1987. In some cases, Fortune
                          used broader industry group titles than XT. For example, Fortune’s title
                          “Diversified Services” included industries such as Broadcasting, Con-
                          struction, and Wholesalers, while JCT listed these three as individual
                          industries. In these cases, we used the more narrowly defined Standard
                          Industrial Classification codes listed in the 1987 Edition of The National
                          Directory of Addresses and Telephone Numbers, and classifications
                          from other effective tax rate studies, such as those of Tax Analysts’. We
                          substituted seven companies in 1986 and 1987 because the JCT classifi-
                          cation continued to be different from classifications in Fortune magazine



                           Page36                                       GAO/GGD-96-69ElffectiveTaxRates
                      Appendix I
                      Scopeand Methodology for Chnputlng
                      Effective Tax Rates




                      and/or the Standard Industrial Classification code or classifications in
                      other studies.

                      Finally, we contacted the Securities and Exchange Commission to obtain
                      annual financial reports (Forms 10-K) for the revised list of companies
                      included in our study. In some cases, the Commission was not able to
                      provide microfiche information because it was not available or was illeg-
                      ible. As a result, we went to local public and university libraries, as well
                      as telephoned corporate officials, to obtain the required information. We
                      made substitutions for six and seven companies in 1986 and 1987,
                      respectively, because our other additional efforts still proved
                      unsuccessful.

                      Because some companies included in prior Joint Committee studies did
                      not meet each of the three criteria in 1986 or 1987, we substituted a
                      total of 27 and 37 companies in 1986 and 1987, respectively. This sub-
                      stitution brought the number of individual companies in our study to
                      237, although rates were computed for 220 companies in each year. Of
                      the 220 companies (representing 29 industries) in 1986 and 1987, 193
                      and 183, respectively, were the same as those from prior JCT studies.


                      To be consistent with the methodology used by the Joint Committee on
Computing Effective   Taxation, we computed effective tax rates using only taxes currently
Tax Rates             payable as reported in publicly available financial statements. In annual
                      financial statements, companies disclose (1) pretax income, (2) income
                      tax expense, and (3) net income. Income tax expense is separated into
                      two categories-amounts currently payable and amounts deferred. The
                      portion currently payable represents taxes estimated to be paid during
                      the year. The deferred portion represents a liability for taxes payable in
                      the future. Therefore, we computed rates for all 237 companies and 29
                      industry groups in our study for 1986 and 1987 by comparing the
                      income taxes currently payable with pretax income.




                      Page 37                                        GAO/GGD9@69Effective Tax Rates
                          Appendix I
                          Scope and Methodology for Computing
                          Effective Tax Rates




JCT/GAO Formula for            Income Taxes Currently Payable
                                 divided by                                     = Effective Tax Rate
Computing Effective Tax        Pretax Income
Rates
                               Pretax income was computed by making the following adjustments
                               to net income:

                               Net Income         +/-Tax Expense/Benefit
                                                  +/- Income/Loss from Minority Interest in
                                                       Subsidiaries
                                                  -/+ Income/Loss from Equity Interest
                                                  -/+ Gain/Loss from Extraordinary Items or
                                                       Income/Loss from Discontinued Operations
                                                  -State/Local Income Taxes (Currently Payable
                                                    Portion)

                          While company income figures were readily available from annual
                          reports, adjustments consistent with JCT’S methodology were made to
                          income taxes currently payable and reported net income. Discussion of
                          these adjustments and their impact follows.


                          Investment tax credit: One of two methods was used to account for
Adjustments to Income     investment tax credits in the financial statements-the flow-through
Taxes Currently           method or the deferred method. Under the flow-through method, the
Payable                   entire credit is used to reduce taxes currently payable in the year prop-
                          erty generating the credit is acquired. Under the deferred method, the
                          credit is amortized over the productive life of the property generating
                          the credit. Therefore, to show a more accurate current tax liability, we
                          offset income taxes currently payable by the credit where the flow-
                          through method was used. Where the deferred method was used, we off-
                          set short-term deferred taxes by the credit.


                          Consolidation of subsidiaries/minority interests: Companies consolidate
Adjustments
       -    to Derive     their minority interest in subsidiaries, including foreign subsidiaries, dif-
Pretax Income             ferently for financial statement purposes than for income tax purposes.
                          Whereas companies generally consolidate subsidiaries that are more
                          than 50 percent owned for financial statement purposes, generally only
                          domestic subsidiaries that are 80 percent or more owned are eligible to
                          be consolidated for income tax purposes.




                           Page 38                                       GAO/GGD9989 Effective Tax Rates
                     Appendix I
                     Scope and Methodology for Computing
                     Effective Tax Rates




                     The consolidated financial statements often show the total tax expense
                     of subsidiaries without the after-tax income attributable to minority
                     interest. To compensate for this, we adjusted net income from financial
                     statements to reverse the elimination of income (or loss) attributable to
                     minority interest.

                     Equity accounting for investments in affiliates and joint ventures: Gen-
                     erally, investments in affiliates (20 to 50 percent owned companies) and
                     joint ventures are accounted for by the equity method. Under this
                      method, the parent company’s provision for income taxes may or may
                      not include income taxes attributable to the parent’s equity in the affili-
                      ate or joint venture. If the tax was not included, we made an adjustment
                     to eliminate the income. Otherwise, no adjustment was made to income.

                     Extraordinary Items or Discontinued Operations: Extraordinary items
                     are transactions or events that are significantly different from typical or
                     customary business activities. Also, they are not expected to recur fre-
                     quently and are not normally considered in evaluating the ordinary
                     operating results of a company.

                     In keeping with our objective to determine the effective tax rates of a
                     company’s current operations, we excluded extraordinary gains and
                     losses and income and loss from discontinued operations, along with its
                     related tax effect.

                     State/Local Income Taxes: We considered state and/or local income
                     taxes, if applicable, to be an expense. Therefore, we eliminated the cur-
                     rently payable portion of this tax amount from pretax income prior to
                     any U.S., foreign, or worldwide tax computations.


                     The treatment of deferred taxes may have a significant impact on the
Impact of Deferred   computation of effective tax rates. For example, of the 237 companies in
Taxes                our study, 131 had 1J.S.rates below 10 percent or above the statutory
                     rate. We computed rates using taxes currently payable and deferred for
                     these 131 companies to determine the extent to which the high/low
                     rates resulted from the impact of deferred taxes. Our analyses showed
                     that for 38 companies in 1986 and 34 in 1987, rates were no longer high
                     or low with the inclusion of deferred taxes.

                     In computing the deferred U.S., foreign, and worldwide rates, we used
                     an equation similar to that used in computing current rates with one



                      Page 39                                       GAO/GGD9069 Effective Tax Rates
                        Appendix I
                        Scope and Methodology for Computing
                        Effective Tax Rates




                        additional adjustment to pretax income: we eliminated the amount of
                        deferred state/local taxes. The computation used is shown.


GAO Formula for         Income Tax Expense
                        divided by                                       = Effective Tax Rate
Computing Deferred      (Pretax Income minus Deferred State/Local Taxes)
Effective Tax Rates
                        To compute the varying deferred rates, we compiled a list of short-term
                        and long-term deferred tax items. The list was compiled on the basis of
                        several studies, including the study by Tax Analysts.

                        For the income tax expense amount, we included the income taxes cur-
                        rently payable and short-term deferred taxes. Short-term deferred taxes
                        included:

                        inventory valuation;
                        warranty costs;
                        short-term pension costs (termination and settlement);
                        accruals not currently deductible for tax (insurance, repairs, and
                        medical);
                        allowance for doubtful accounts;
                        gain/loss on exchange or sale of equipment;
                        tax rate changes;
                        revision of prior year estimates;
                        unrealized foreign currency exchange gain/loss (translation
                        adjustments);
                      . effect on deferred taxes of net operating loss, investment tax credit, and
                        alternative minimum tax carryforward; and
                      . employee deferred compensation costs (employee stock options, sever-
                        ance, and relocation).

                        The following list of deferred items was considered to be long-term on
                        the premise that as long as a company is growing, newly generated
                        deferred taxes will equal or exceed reversals to currently payable taxes:

                        accelerated depreciation;
                        intangible drilling/mine development/fuel-related costs;
                        cash basis (financial institutions);
                        installment sales;
                        domestic international sales corporation;
                        undistributed equity method earnings;
                        leasing transactions;


                        Page 40                                       GAO/GGD9069 Effective Tax Rates
     Appendix I
     Scope and Methodology for Computing
     Effective Tax Rates




.    long-term contracts;
.    capitalized interest (overhead cost of construction);
.    long-term pension costs (prepaid, restructuring);
.    provision for write-down of noncurrent assets;
.    capitalized trademark, start-up costs;
.    reserve for loss contingencies (divestitures);
.    provision for loan losses;
.    interest income and loan fees;
.    unbilled revenue (utilities);
.    retirement and restructuring of debt;
 .   interest on nonaccrual loans; and
 .   gain/loss on exchange or sale of real estate.




      Page 41                                       GAO/GGD-90&9 Effective Tax Rates
Appendix II

Comments From Company Officials


                      We contacted company officials at all 237 companies to request their
                      comments on rates we computed. Letters sent to tax directors of each
                      company contained rates computed that included only taxes currently
                      payable. Additionally, for the companies with high and/or low U.S.
                      rates in 1986 and/or 1987, we requested comments on our analysis of
                      factors contributing to such rates. Letters sent to these company offi-
                      cials also contained computed rates that included currently payable and
                      short-term deferred taxes.

                      Officials from 94 companies responded and changes were made where
                      warranted. The officials had the following comments:

              l Fifteen agreed with the methodology and rates computed.
              0 Twenty-six agreed with the methodology but provided additional infor-
                mation to recompute rates.
              . Eight disagreed with the methodology but provided no additional infor-
                mation to recompute rates.
              l Thirty-eight disagreed with the methodology and provided additional
                information to recompute rates.
                Seven made other remarks.
                  l




                      If company officials agreed with the rates we computed, we did nothing
                      further. Of 64 companies that provided additional information, we
                      recomputed rates for 30 companies where supporting documentation
                      was available. We did not make changes for 34 companies because docu-
                      mentation was not provided or the change did not conform to our meth-
                      odology. In many cases where company officials expressed
                      disagreement with our methodology, their comments dealt with the non-
                      inclusion of deferred taxes in the computations. As stated in chapter 1,
                      we recognize that there are different ways to compute effective tax
                      rates. Our computations excluded deferred taxes so that our methodol-
                      ogy would be consistent with earlier ET studies.




                      Page 42                                     GAO/GGD9069 Effective Tax Rates
Comparison of Worldwide Effective Tax Rates
by Industry for the Years 1980 Through 1983,
1986, and 1987

                                                                                                Effective tax rates expressed as a percent
                                                                                                     JCT             -    1980-l 903       GAO
.Induattv
  . ---. ,                                                                      1980             1981     1982     1983     Average    1986    1 987
Aerospace                                                                        20 3%           12.0%           7 1%       18.1%            14.7%         196%       309%
Reveranes                                                                        32 7            33 2           28.8 ~___-  27.3             30 3          28.0       364
Broadcastrng                                                                            h               b       13.7        21 7                    b      33 4       31.5
Chemicals                                                                        30 3            29.2           47.3__-.--
                                                                                                                       -5z-                 39 3           33.2
                                                                                                                                                             ---.     42.8
Computers and office equipment                                                   36 9            39 1           37.1         38.1           37.8           38 6       34.4
                                                                                                                                          __~
Constructron                                                                             b              b       22 6         29 3                   b   8,399.3     (73.4)
                                                                                                                                                                  -.-
Electronrcs and appliances                                                       27 5            24.0           21.4         164            22.6           31.8       33.3
Ftnancial institutrons                                                           22.5            24 5           24.3         24.3           23.9
                                                                                                                                          __~__            27 8      (28.5Y
Food processors                                                                  37 6            326            36.5         29.3           335            35.7       38 3
,-I^^^ LxJIIc;leLe,
        _^_^_..I^ d”labl”OD,
                    ..L._^^:.,^^ aI”
                                 ^..A yypu”
                                      ^.I^^,, -                                          b               b      17 0         74 *                   b      20 5       767
Ukibb,                                     ’
                                                                                                                                                ~__
Instrument companies                                                              40 7            294           26.9         36.7            33.4     36.0           33.9
                                        -___-.
Investment companies                                                                     h               b      23.3         138                 b    27.1           25.8
___~__                                                                                                                                   ~~
                                                                                  185             11 5                 d             d           d     (5.1)”         (0.6)
Metal manufactunng
Metal products                                                                           I:      b    42 8                   29 3                b    4Q- n-         ?I!?
                                                                                                                                                                     - -. 3-
hdinmn
,“,,,   ,,,   ‘y
                                                                                                 b         d                         0           b    53.5           44.5
Motor vehrcles                                                                         b         b         d                  104                b      36             67
Paper and wood products                                                            70       (8 7)     425                      72            4.1      13.9           18.1
__~
Petroleume                                                                        44 7      38.0      38 2                    42 0          40.9      28.6
                                                                                                                                                     ____-           54.7
__~.~                                                         ~-.                  ~~~
 Pharmaceuticals                                                                  41 5      41.3      38 3                    32.1          37 8      37.1           34.3
 Retailrng                                                                        35 1      24.5      21 6                    21 3          24.4      29.7           42.0
-_      ~~-
 Rubber                                                                                I,        b    59 6                    350                b    48.9           34.8
                                                                                       ~,~ ~~     ~380-.                    38 g
Soaps and cosmetics                                                                              b                                               b    27.9           45.3
Telecommunrcations                                                                  --t,                 b       2.3          5.6                b    264            28.9
Tobacco                                                                           29 9            29.5          32.7         32 9           31.4
                                                                                                                                              -.__-~-__32.1           29 3
Transportation:
  Airlrnes                                                                        14.5                      d           d            d              d  (85.5)        24.8
   Rarlroads                                                                      107              (7 5)          4.1          3.3              24    (1132)         15.8
        Trucking                                                                  38 4            46 9          37 2          34.6             38.6     28 7         31 0
  Utrlitres (gas and electric)’                                                   109             10.3          156            71              10.7     14.7         180
  Wholesalers                                                                               n          b        34.1          35.9                  b   37.7         40.1
   AVPC2CW                                                                        34 3%           29.6%         29 6%         29.2%         --          28 1%        35.5%
                                                  aA slmrlar effectwe tax rate study was nof done for tax year 1985 The study for tax year 1984 was not
                                                  publIshed
                                                  bThe 1980 and 1981 rates are not available, the 1980 1983 average was not computed

                                                  Vate shown IS arrthmet~cally dIstorted due to a book loss A book loss causes the sign of the effectwe
                                                  tax rate to be negative (benefit) when a tax IS pad or positive (expense) when a tax benefit IS received.
                                                  just the opposite of what the sign should be

                                                  dJCT did not report rates on book losses If the Industry experienced an aggregate book loss and either
                                                  a refund was due or a tax vvas pad




                                                  Page 43                                                                      GAO/GGD90-69 Flffective Tax Rates
Cmnparison of Worldwide Effective Tax
Rates by Industry for the Years 1980 Through
1983,1986, and 1987




eSome companies <ncluded m the 1982 and 1983 studes were classified with crude ml production in
1980and 1981.
‘In 1980 and 1981, the utllltles group mcluded AT&T and GTE The 1980 and 1961 utllltles rate IS
restated to mclude only electric and gas uttl&!s




  Page 44                                                        GAO/GGD90-69 Effective Tax Rates
Page 46   GAO/GGD.9049 Effective Tax Rates
Appendix IV

Comparison of Effective Tax Rates by Industry
Group for 1986

               Thousands of dollars



                                                                            U.S. income
                                                                             before tax
               Aerospace                                                      $3,859,326
               Beverages                                                       1,951,794
               Broadcasting                                                      751,387
               Chemicals                                                       2,084,800
               Computers and offrce equrpment                                  2,419,066
               Constructron                                                       (24,477)
               Electronicsand appkances                                        5 354 73.5
               Financral rnstrtutions                                           4,449,412
               Food processors                                                  3,286,948
               Glass, concrete, abrasrves, and gypsum                           1,048,845
               Instrument companres                                             1,150,523
               Investment companres                                             2,395,582
               Metal manufacturrng                                             (3,235,805)
               Metal products                                                     129,878
               Mrnrng                                                             254,102
               Motor vehrcles                                                   6,292,121
               Paper and wood products.-                         -              1,594,507
               Petroleum                                                        1,736,422
               Pharmaceutrcals                                                  2,627,041
               RetaIling                                                        5,339,797
               Rubber                                                             284,400
               Soaps and cosmetrcs                      -                      1,431,852
               Telecommunrcatrons                                             13,820,475
               Tobacco                                                         3,757,044
               Transportation:
                 Airlines                                                        200,197
                 Rarlroads                                                      (221,092)
                                                        -
                  Trucking                                                     1,695,534
               Utrlrtres (elechic and gas)                                    11 ,174,991
               Wholesalers                                                        9.15 044




               Page 46                                  GAO/GGD90-69 Effective Tax Rates
                                                   Appendix IV
                                                   Comparison of Effective Tax Rates by
                                                   Industry Group for 1986




          .~
                                                                                                           Effective tax rate expressed as a percent
                                                                                                                            Foreign tax  Worldwide tax
        Foreign         Worldwide                                                                                                rate on         rate on
         income     income before      Current U.S.        Foreign tax             Worldwide tax        U.S. tax rate on        foreign       worldwide
      before tax               tax     tax expense           expense                    expense            U.S. income          income           income
       5565,420         541424,746          5611,756             5256,596                   $868,352                 15.9             45.4            196
                                                                                                                                                 ~-
       1,181,595          3,133,389            421,124             456,091                    877,215               21.6              38.6            28.0
         187,217            938,604            241,500               71,600                   313,100               32.1              38.2            33.4
                              _____-___~____-~
       2,844,500          4,929,300            281,900           1,353,ooo                  1234,900                 13.5             47.6            33.2
                                       __~                                           -                                                            __-
       7,740.490        10,159,556              (14,008)         3,931,639                  3,917.631                (0.6)            50.8            386
          24,914                 437        --49,327                (12,622)                    36,705            (201.5)            (50.7)        8399.3
                                                                                             ~.                                                   ~-
       1,533,076          6,887,811         1,563,104              629,103     -~ -         2,192,207 ____~          29.2             41.0            31 8
       2,692,072          7,141,484            382,475           1,602,761                  1.985,256                  8.6            59.5            278
                                   -~.      -                                                                          __________
       1 540.781          4.827.729         1.064.668              658.027                  c722.695                 324              427
                                                                               -        -                                                        ___- 357
         366,030          1,414,675            408,958             149,939                    558,897                39.0             41.0            39.5
       1,269,504          2,420,027            407,065             464,204          -        ~871,269                35.4             36.6            36.0
__
         582,842          2,978,424            664,111             143,011                    807,122                277              24.5            271
                                                                                            ~..                        -._____
         142,400         (3,093,405)             91,100             66,100                     157,200                (2 Qa           464              (5.1)
         7.74675             364.553
                             .~ ,~.~                416            178.211                     178.627                 03             75.9             490
          16,745             270,847            109,649             35,232                     144,881               43.2            2104              53.5
-____
       3,364,871          9,656,992        (1,154,843)           1,498,321                     343,478 --           (18.4)            44.5              3.6
         227,345           1,821,852            182,732             69,660                     252,392               115              306              13.9
                                              .~~__~.                                                       ~~~..
      16,219,413         17,955,835        (1,322.928)           6,460,964           _      5,138,036               (76.2)            39.8             28.6
       1,886,600          4,513.641             937,849            735,628                   1,673,477               357              39.0             37 1
                                                                                            ~-.
         356,695          5,696,492         1,561,353              133,224                   1.694,577               29.2             37.3             29.7
         307,000             591,400             64,300            225,000          -          289,300               226              73.3             489
-____.
         437,223           1,869,075            373,716            147,043                     520,759 .~__          26.1              336             27.9
         267,458         14,087.933         35557,892              161,676          -       3,719,568                25.7              60.4            26.4
       1,172,328          4.929,372          1,127,642             452,703                   1,580,345               30.0 -38.6-----                   32.1
                ~__..            ~
         (100,073)          100,124           ~-(87,016)~~~~ ~        1,452                    (85,564)              (43 5)           (1 5Y            (855)
                0          (221,092)           250,273                    0                    250,273              (113.2)               .           (113.2)
                                                                                                                                                 ___-
            8,398         1,703,932            482,372                5,975                   488,347                 28.4            71.1              28.7
~_~
            9,970        11,184,961          1,646,279                3,218                 I ,649,497 ~__~           147             32.3              14.7
_                                                                                                                                                ___-
            6.411           941.455            349.091                5.384                    354,475                37.3%           840%              377%

                                                    aRates shown are arlthmetlcallv dIstorted due to book losses




                                                    Page 47                                                               GAO/GGD90-69 Effective Tax Rates
Comparison of Effective Tax Rates by Industry
Group for 1987

               Thousands of dollars



                                                                           U.S. income
                                                                            before tax
               Aerospace                                                     $4,717,508
               Beverages                                                       2,025,354
               Broadcasting                                                    1 ,I05807
               Chemicals                                                       3,728,600
               Computers and office equipment                                  4,780,622
               Construction                                                        (72,027)
               Electronics and appliances                                      5,920,540
               Financial rnstitutrons                                             380,146
               Food processors                                                 3,875,569
               Glass, concrete, abrasives, and gypsum                          1,067,589
               Instrument companres                                            2.135.314
               Investment companies                                            2,268,678
               Metal manufactunng                                                 905,637
               Metal products                                                     401 ,011
               Mining                                                             299,599
               Motor vehicles                                                  8.726.075
               Paper and wood products                                         2,671,730
               Petroleum                                                        I,81 8,903
               Pharmaceuticals                                                 3,488,911
               Retarlina                                                       4.865,618
               Rubber                                                             807,130
               Soaps and cosmetrcs                                              1,175,399
               Telecommunications                                             14,915,957
               Tobacco                                                         4,175,985
               Transoortation.
                   Airlines                                                    1,001,013
                   Ratlroads                                                   3,046,656
                   Trucking                                                    1,081,633
                Utilrtres (electnc and gas)                                    9,096,107
               Wholesalers                                                     1,022,367




                Page 48                                 GAO/GGB99-69 Effective Tax Rates
                                                   Appendix V
                                                   Cmnparison of Effective Tax Rates by
                                                   Industry Group for 1987




                                                                                                   Effective tax rate expressed as a percent -
                                                                                                                    Foreign tax  Worldwide tax
      Foreign           Worldwide                                                                                        rate on          rate on
       income       income before         Current U.S.    Foreign tax       Worldwide tax        U.S. tax rate on        foreign      worldwide
    before tax                 tax       tax expense        expense              expense            U.S. income         income           income
      $851,188          $5,568,696         $1,421,215         $297,202            $1,718,417                  30.1%
                                                                                                                --               34.9%             309
      1,548,571          3,573,925            763,083          539,268             1,302,351                  377                348       -'__-   364
                                                                                                  ~__~_~~
        178,996          1,284,803            324,300           80,700               405,000                  29.3               45.1              31.5
      3,602,lOO          7,330,700           I,37 2.700       1.764.7Oii           3.137.400     .~
      8,447,484         13,228,106             593,682        3,955,978            4.549,660                  12.4               46.8              34.4
         38.381             (33.646)            26.313            (1.606)             24,707                  (36.5)
                            ~~~      I
                                                                                                                        ____-__ 4.2.---            (734)
       1,489,984          7,410,524          1,896,875          568,109    -
                                                                                   2,464,984                   32.0
                                                                                                             ~~-                 38.1               333
..~.~
      (7,515,054)        (7,334,914)           663,522        1,458,992            2,092,514                 166.7              (18.9)             (28.5)
       1,302,540          5,178,109          1,451,949          532,146            1.984.095                   375               409                38.3
         494,866          1,562,455            378,972          195,027              573,999                  355                394                367
       2,046,699          4,182,013            742.680          674,342            1.417222        ____       34.8               32.9               33.9
        (347,173)         1,921,505            320,158          174,734    -
                                                                                     494,892                  14.1              (50.3)              2ia
         504,900          1,410,537           (174,345)         165,400                (8,945)               (193)               32.8-__            (0.6)
         611,403          1,012,414            186,359
                                            ~___                211,364              397,723                  46.5               34.6              39 3
         848,713          1,148,312            108,211          402,650              510,861                  361                47.4              44.5
       4,356,520         13,082,595            337,873          537,795 -~           875.668                   3.9               12.3               6.7
         402,175          3,073,905            458,381            98,913             557,294                  172                24.6              18.1
      15,074,415         16,893,318          2,207,203        7,026,197            9,233,400                 1213                46.6              54.7
       2,433,700          5,922,611            977,895        1,055,389 .~         2,033,284                  28.0               43.4              34.3
         859,404          5,725,022          2,243,329          159,823            2,403,152                  46.1               18.6              42.0
         561,206          1,368,336            153,026          322,569 ~.           475,595                   190               575               348
         413,916          1,589,315            538,480           181,016             719,496                   458               43 7              453
         -__,___
         7f-xfKs         .-,._ .,---
                         151R4fl26           4 215.336           178.258           4.393 594                   28.3              66.5              28.9
       1,570,638          5,746,623          1.174,547          509,263            1,683,810                   28.1              32.4              29.3

          46,250          1,047.263            256,841             3,081              259,922                  25.7               6.7               248
               0          3,046,656            475,244             6,000              481,244                  156                O.Ob              15.8
           9,464          1,091,097            331,780             6,820              338,600                  30.7              721                31 0
           6,446          9,102,553          1,638,801             1,725      -     1,640,526                  18.0              26.8               18.0
                                              ____.
           3,107          1,025,474            403,410             7,669              411,079                  39.5%            2468%               401%

                                                    'Rates shown are arlthmellcally dlstorted due to book losses
                                                    bTaxeswere pad orarefund ~asrecelvedalthoughthelndustry            reported nomcome




                                                    Page 49                                                           GAO/GGB90439 Effective Tax Rates
Appendix VI

Comparison of U.S., Foreign and Worldwide
Effective Tax Rates by Industry and Company
for 1986
               Thousands of dollars



                                                                       U.S. income
                                                                        before tax
               Aerospace.
               meAllred-Signal Inc.                                       $580,000
                 The Boerng Company                                         921,500
                 General Dynamics                                           197,600
               -Lockheed     Corporatron                                    710,000
                  Marttn Marietta Corporation                               314,034
                  McDonnell Douglas Corporation                             389,300
                  Rockwell Internatronal Corporation                        856,200
                  United Technologies Corporatron                          (109,308)
               - Industry totals                                          3,859,326
               Beverages:
                 Anheuser-Busch Companres, Inc.                             912,200
                 The Coca-Cola Company                                      424,800
                 G. Heileman Brewrng Company, Inc.                           83,920
                 Joseph E. Seagram & Sons, Inc                              149,874
                 Pepsrco, Inc                                               381,000
                  lndustrv totals                                         1,951,794
               Broadcasting.
                                                               ~.        ___-.
                  Caprtal Crtres/ABC, lnc                                   366,443
                  CBS Inc.                                                       69,344
                  MCA IllC
                                                          .~                     74,504
                  Warner Communicatrons     Inc.                             219,096
                  Industry totals                                           751,387
               Chemrcals:
                 American Cyanamrd Company                                       96,300
                 The Dow Chemrcal Company                                    466,000
                 E. I. Du Pont De Nemours and Company                      1,509,000
                 Monsanto Company                                            450,000
                 Unwon Carbrde Corooratron                                    44,000
                 W.R. Grace &Co                                             (502,500)
                  lndustrv totals                                         2,084,800
                Computers and offrce equrpment.
                  Control Data Corporatron                                  (334,600)
                  Drgrtal Equrpment
                             ~-     Corporatron
                                         ~~~-.                               364,515
                  Hewlett-Packard Comoanv                                    276,000




                Page60                                  GAO/GGD-9069EffectiveTaxRates
                                                   Appendix VI
                                                   comparison of U.S., For&n and Worldwide
                                                   Effective Tax Rates by Industry and
                                                   Company for 1986




___-
                                                                                                      Effective tax rate expressed as a percent
                                                                                                                       Foreign tax  Worldwide tax
         Foreign          Worldwide                                                                                         rate on          rate on
          income      income before      Current U.S.      Foreign tax      Worldwide tax          U.S. tax rate on        foreign       worldwide
       before tax                tax     tax expense         expense             expense              U.S. income          income           income
                                                                                                         .__
         $170,000           5750,000         $50.800           $85,000            5135,800                                  8.8%           50.0%              18.1%
                                                                                                                 _____
                 0           921,500          99,000                  0               99,000                               107                 .              10.7
                 0            197,600        136,600                  0             138,600                                70.1                .              70.1
                                                            ____~             ~~ ~~-
            4,O@J             714,000    --__- 7,000              2,000                9,000       -__--                    1.0            50.0                1.3
            4,410             318,444         49,450        ____~~2,350               51,800                               15.7            533                16.3
                                                                                  .-__
           38,300             427,600         62,400              6,300               68,700                               16.0            16.4               161
                                    ____       __-
          157,700           1,013,900         83,700             59,000    -~        142,700                                98             37.4               14.1
-i3QiO                         81,702        120,806            101,946              222,752                             (110.5)           534               272.6
                                                                              ~~ -__                                                                 __~-
          565,420          4,424,746        611,756            256,596              868,352                               15.9             45.4               19.6

                 0            912,200          262,200                0              262,200                              28.7                 .                  28.7
__-                                                         -__-            ~~    ~-__~
           811,146          1,235,946            (9,850)        424,953              415,103                              (2.3)            52.4                   33.6
                                                                                  -.
                 0             83,920            18,058                0               18,058 ----21                                           .                  21.5
            78.049            227,923             8,716           20,338               29,054                              5.8             261                    127
           292,400            673,400           142,000           10,800              152,800                             37.3              3.7                   22.7
                                                                                               ____
         1,181,595         3,133,389           421,124          456,091              077,215                              21.6             38.6                   28.0
                                                                                                                  ___~--__
                 0           388,443           205,800                 0           205,800                        53.0                         .                  53.0
                                  -__                                            -__
                 0            69,344            18,700                 0             18,700                       27.0                         .                  270
           120,500           195,004            10,600            29,700             40,300                       14.2                     24.6                   20.7
                                ___~--                           __-         ~~ ~- ---
            66,717           285,813             6,400            41,900             48,300              ~~__--__ 29                       62.8                   16.9
                                                                                 -~__-
          187,217            938,604           241,500           71,600            313,100                        32.1                     38.2                   33.4
                                                                                                                                                    _-       --
            172,400           268,700             6,400           75,500             81,900
                                                                                  -~ __~_____                               6.6            43.8                   30.5
                                                                                            ---
            741,000         1,229,ooo            50,000          308,000            358,000                                10.2            416                    29 1
          1,430,000         2.939,ooo           232,000          746,000            978,000                                154             52.2                   33.3
                                  ~_~-------
            174,000           624,000            20,000           88,000            108,000                                 4.4            50.6                   17.3
 ---__      152,000           196,000           (61,OW __-.- 47,000                  (14,000)                            (1386)            309                      (7.1)
            175,100          (327,400)           34,500           88,500             123,000                               (6.9)           50.5                   (37 6)
                                                -.
         2,844,500         4,929,300           281,900         1,353,ooo          1,634,900                                13.5            47.6                    33.2

            48,400           (286,200)          (20,700)          21,900               1,200                                6 2"            45.2                  (0.4)
           474,821            839,338            93,028          123,727             216,755                               25.5             26 1                  25.8
                                                                                                   --~__
           475,000            751,000            21,000          167,000             188,000                                7.6             35.2                  250
                                                                                                                                                         (contmued)




                                                     Page 61                                   4   +.rG--~*‘-.                   GAO/GGlMO-O9 Effective Tax Rates
Appendix VI
Compcu-ison of U.S., Foreign and Worldwide
Effective Tax Rates by Industry and
Company for 1986




Thousands of dollars



                                                                   U.S. income
                                                                    before tax
   Honeywell Inc                                                         (37,400)
--International Busrness Machrnes Corporation        .____      -2,384,ooo
   NCR Corooration                ~~_____.                                   ,~
                                                                         164.249
   Unisys Corporatcon                                                   (400,200)
   Wana Laboratories, Inc                                                  2.500
  Industry totals                                                     2,419,066
Construction:
  Centex                                                                     86,493
  Fluor                                                                     (66.728)
                                                                            ~~~. ~.,
  Morrison Knudsen Corporatron                                             7,194
  Perini Corporation                                                      15.789
  PHM Corporation                                                         40,807
  U.S Home Corporation                                                  (108,032)
  Industry totals                                               -(24,477)
Electronics and aooliances
  Emerson Electric Co.                                                    605,300
  General Electric Companv                                             2.480600
  ITT Corporatton                                                        ‘509,436
   Lrtton Industries, Inc.      -    ~~~____                               85,270
   Motorola, Inc.                                               -131,ooo
   North Amencan Phrlips Corporation                  .___.               100.500
   Ravtheon Comoanv                                                      641 329
   Texas Instruments Incorporated                                         59,900
   Westinahouse Electric Corporation                                     742.006
   Industry totals                                                    5,354,735
.-Financial instrtutions:
                      ____~
     Bank of Boston Corporatton                                          275,916
     BankAmerica Corporation                                            (~1,000)
     Bankers Trust New York Corporatron                                  345,565
    The Chase Manhattan Corporation                                      668.096
                                                                             .~
     Chemical New     York Corporatron
                  _____      ~~~~                                        428,929
     Crticorp                                                            576.060
     Continental Illinois Corporation                                   187,400
     Frrst Bank System                                                   164,900
     First Chicago Corporation                                           398,402




Page 62                                         GAO/GGD9089 Effective Tax Rates
                                                                                                -
                                                          Appendix VI
                                                          CmnparIson of U.S., Foreign and Worldwide
                                                          Effective Tax Rates by Industry and
                                                          Company for 1986




                                                                                                                Ffctax            rate expressed as a percent
                                                                                                                                     Foreian tax  Worldwide tax
           Foreign          Worldwide                                                                                                    rate on          rate on
            income      income before       Current U.S.           Foreign tax           Worldwide tax           U.S. tax rate on        foreign       worldwide
         before tax                tax      tax expense              expense                  expense               U.S. income          income           income
             52,400             15,000                 53,200             31,300                     84,500                   (142 2)            597                      563.3
          5,871,OOO          8,255,OOO            (190,000)        3.222,OOO                   3,032,OOO                        (8 0)            54.9                      36.7
            457,569            621,818               17,964          220,212                      238,176                       109             48 1                       38.3
                                                            ____--
            308,400             (91,800)             10,900          142,900                      153,800                       (2 7)           463                      (167 5)
             52,900              55,400           ~-__- 600            2,600                        3,200                       240              49                         5.6
                                         __-
         7,740,490         l&159,556               (14,008)      3,931,639                     3,917,631                        (‘3.6)          50.6                       38.6

                                                                                                                         __      -~      -~ -
                  0              86,4.93.--__-         55               0                                 55                     01                    .                     0.1
     -
             20,030            146.698)
                                I.        I       39.320         (:17,283)                           22,037                    (58 9)           (86.3)                    (47.2)
              6,661              13,855             9,183           4,091                            13,274                    1276              614                       958
             \1,f10                I+,“IL           5,865             570                             6,435                     37 1            (32 1)                     45.9
--
                  0              40,807                                                                                                              .                      tn
                                                                                                                                                                            \I' *I'I
                                               ~-__ (164)               0                               (164)                    (0 4)
                   0          (108,032)            (4,932) ___-         0~               -~~          W32)                        4 6a               .                      4 6a
             24,914                   437         49,327        (12,622)                             36,705                   (201.5)           (50.7)                  8399.3

__.                                                                                                                             3. 8-~ ~- -405             .-.---.         323
            111,000            716,300              186,300
                                                   --___                  44,900     -            231 200
            611.000          3,091,000                                                          1,260,OOO                       42.8
                                               _ i,O62,000
                                                   -.-.                 198,000
                                                                       ____~                                                                     32.4                      408
            590,172           1,099,608             120,347             225,761                   346,128                       23.6             38.3                      31 5
             29,548             114,818              (48,523)             36,922                     (11,601)                  (569)            125.0                     (10 1)
__-
            128,000            259,000                52,000              39,000
                                                                              ---                     91,000                    39.7             30.5                      351
                  0            100,500                25,000                    0                     25,000                    24.9                 .                     24.9
             10.856            652.185                73,680       __.-.-  8,000                    ~~81,680                    115              737                       125
             39,000             98:900                 (7,000)            28,000                      21,000                   (11 7)            71.8                      21.2
             13,500             755,500               99,300              48,500     -               147,800                    13.4            359.3                      19.6
                                                -________-
          1,533,076          6,887,811           1,563,104              629,103                2,192,207                        29.2             41.0                      31.8

                                  -__              --
             53,994             329,910                  94,314-      __---~29,370                   123,684                    34.2             544                        375
                                                  --
            611,000            (350,000)                      0           184,000                    184,000                     0 0"            30.1                      (52.6)
-107,167                        452,672                  27,649             73,030                   100,679                     80              68 1                       222
                                      __-
             152,889            820,985                 (33,832)          140,641                    106,809                    (5 1)            92.0                       13.0
              27,500            456,429                   3,100             62,700                    65,800 ---.-~~-07                         228.0                       144
           1,021,000          1,597,ooo                 33,000           634,000                     667,000                     57               62.1                      41 8
-_
             (13,500)           173,900                 64,700            12,000 -                    76,700                    345              (88 9)                     44.1
             (25,700)           139,200                 52,000             3,900                      55,900                    31 5             (152)                      40.2
             (53.0001           345.402                 20,700            32,700                      53,400                     52              (61 7ja                    15.5
                                                                                                                                                                     (contmued)




                                                            Page 63                                                                    GAO/GM&9069 Effective Tax Rates
Appendix VI
Comparison of U.S., Fore&n and Worldwide
Effective Tax Rates by Industry and
Company for 1986




Thousands of dollars



                                                              U.S. income
                                                               before tax
  Frrst Interstate Bancorp                                            326,879
  InterFIrst Corooratron                                             (331.000)
  J.P. Morgan &Co ,&orporated                                         539,700
  Manufacturers Hanover Corporatron                                   184,073
  Marrne Midland Banks, Inc                                           204,702
  Mellon Bank Corporatron                                             238,000
  NCNB Corporation                                                    255,931
  Norwest Corporatron                                                 129,600
  RepublicBank Corporatron                                             (34,421)
  Secunty Pacrfrc Corporatron                                         482,300
  Wells Fargo & Company                                               369,500
  Industry totals                                                   4,449,412
Food processrng:
  Archer-Danrels-Mrdland Company                                      378,225
  Borden, Inc                                                         266,034
  CPC lnternatronal Inc                                               123,600
  General Mrlls. Inc                                                  283.400
  IC Industries, Inc                                                  180,300
  Kraft, Inc                                                          498,200
  Occidental Petroleum Corporation                                     (11,000)
  The Pillsbury Company                                               330,200
  The Quaker Oats Company                                             209,900
  Sara Lee Corporatron                                                227,816
  Cambell Soup Company                                                299,100
  Kellogg Company                                                     454,000
  United Brands Company                                                 47,173
   Industry totals                                                  3,206,940
Glass, concrete, abraswes, and gypsum
  Manville Corporatrol I                                                 1,705
  Owens-Cornrng Frberglas Corporation                         ..~     (21,000)
                                                                       --~
  Owens-lllrnors, Inc                                                 199,700
  PPG Industries. Inc                                                 399,900
  USG Corporatron                                                     398,540
   Industry totals                                                  1.040.845




Page 54                                    GAO/GGB90-69 Effective Tax Rates
                                           Appendix VI
                                           tim~&on     of US.. For&n and Worldwide
                                           Effekve Tax Rate; by I&stry   and
                                           Company for 1996




                                                                                           Effective tax rate expressed as a percent
                                                                                                            Foreign tax  Worldwide tax
   Foreign         Worldwide                                                                                    rate on           rate on
   income      income before      Current U.S.    Foreign tax         Worldwide tax     U.S. tax rate on        foreign       worldwide
before tax                tax     tax expense       expense                expense         U.S. income          income           income
    75,785            402,664           14,850              16,260           31,110                  4.5             21 5                7.7
      5,000           (326,000)              0               1,000            1,000                  0.0"            20.0                (0.3)
   544,900           1,084,600         (25,800)            206,500          180,700                 (4.8)            37.9               16.7
   207,277             391,350         (32,027)            116,976           84,949                (17.4)            56.4               21 7
   (30,335)            174,367          (2,455)             13,324           10,869                 (1.2)            (43.9)               62
    (55,000)           183,000          24,000              13,000           37,000                10.1              (23.6)             20.2
    (12,405)           243,526          30,395               2,928           33,323                11.9              (23.6)             13.7
          0            129,600          35,800               5,500           41,300                27.6                O.Ob             319
     34,800                379         (13,719)              7,252            (6,467)              39 9”              20.8           (1706 3)
     50,600            532,900          38,200              31,000           69,200                  79               61 3              130
      ww               359,600          51,600              16,700           68,300                 14.0            (168 7)             190
2,692,072           7,141,484         382,475         1,602,781           1,985,256                  8.6              59.5              27.8


         0            378,225            92,046       ~~          0          92,046                 24.3                  .             24.3
   101,978            368,012          100,500              29,400          129,900                 378               28.8              35.3
   238,000            361,600             2,300             83,700           86,000                  1.9              35.2              23.8
    17,900            301,300            88,300               6,600          94,900                 31.2              369               31 5
    27,800            208,100          107,800               14,800         122,600                 59.8              53.2              58.9
   167,500            665,700          103,000              56,600          159,600                 207               33.8              240
   521,000            510,000             2,000            315,000          317,000                (18.2)             60.5              62.2
    27,500            357,700          II 9,200               6,900         126,100                 361               25 1              353
    79,300            289,200            91,100              25,200         116,300                 434               31 8              40 2
   114,152            341,968            55,925              15,089          71,014                 245               13.2              20.8
    77,200            376,300            96,300              27,400         123,700                 32.2              35.5              32.9
   115,500            569,500          178,700               44,800         223,500                 39.4              38.8              39.2
    52,951            100,124            27,497              32,538         -60,035                 587-              61.4              60.0
 1,540,781          4,027,729        1,064,668             658,027        1,722,695                 32.4              42.7              35.7


     64,255            135,960           1,238              31,274            32,512                 1.7              48.7              23.9
     46,000             25,000          42,000              17,000            59,000              (200.0)             370              7360
     46,500            246,200         105,800              17,100           122,900                530               36.8              49.9
    142,200            542,100         105,900              57,600           163,500                26.5              40.5              30.2
     67,075            465,615         154,020              26,965           180,985                38.6              40.2              38.9
   366,030          1,414,875          408,958             149,939          550,897                 39.0              41 .o             39.5
                                                                                                                                 (contmued)




                                            Page 65                                                        GAO/GGD-90-69 Effective Tax Rates
Appendix VI
Comparison of U.S., Foreign and Worldwide
Effective Tax Rates by Industry and
Company for 1986




Thousands of dollars



                                                                        U.S. income
                                                                         before tax
Instrument companies:
   Eastman Kodak Company                                                      297,404
-_
   General Signal Corporation                                                  92,244
  Lear Sealer. Inc.                                                            48,875
  Minnesota Mining & Manufactunng Company                                     791,000
  Xerox Corporation                                                            (7wQO)
   lndustrv totals                                                          1,150,623
Investment companies:
   Amencan Express Company                                                  1,215,OOO
   The E F. Hutton Group, Inc                                                (120,105)
~- Frrst Boston, Inc                           ~~.                            217,014
-__.__
   Merrill Lynch & Co., Inc                                                   651,673
   Salomon Inc.                                                               432,000
   Industry totals                                                          2,395,682
Metal manufacturing:                           ~~-
   Aluminum Company of Amenca (ALCOA)                                          331,200
-_______.
   Armco Inc.                                                                 (361,600)
   Bethlehem Steel Corporatron                                                (170,500)
   Inland Steel Industries, Inc                                                 36,595
-~ The LTV Corporatron                                                      (3,259,300)
   Reynolds Metals Company                                                     187,800
   Industry totals                                                         (3,235,805)
 Metal products:                 ~~-~.
    Combustion Engrneenng,  __~ Inc                                           100,729
 -~ Crown Cork & Seal Company, Inc            ~-                               83,565
    The Gillette Company                                                      (51,000)
    Triangle Industries, Inc.    ~~~ _~-                                       55,084
    Emhart                                                                    (58,500)
   lndustrv totals                                                            129,970
 Mining:
 .~.~.___                 ~-
    Amax Inc                                                                   (69,096)
    Freeport-McMoran, lnc                                                      (74,092)
                              ___-~._
    Inspiration Resources Corporation         ~~                                37,278
    Newmont Mrnrng Corporation                                                 100,431
                                      ~____
    Phelps-Dodge Corporatron                                                    30,891




 Page 66                                             GAO/GGD!30459 Effective Tax Rates
                                                      Appendix VI
                                                      Comparison of U.S., Foreign and Worldwide
                                                      Effective Tax Rates by Industry and
                                                      Company for 1986




                                                                                                         Effective tax rate expressed as a percent
                                                                                                                          Foreign tax  Worldwide tai
         Foreign            Worldwide                                                                                         rate on          rate on
          income        income before        Current U.S.      Foreign tax          Worldwide tax     U.S. tax rate on        foreign       worldwide
       before tax                  tax       tax expense         expense                 expense         U.S. income          income           income

          293,000              590,404             WOO)             124,000                115,000                  (3 0)           423                      195
           22,562               114,806           10,197               9,112                19,309                 11.1             40.4                     16.8
                                                                                                                                                      ~~-
           22,942                71,817 -39.868                       12,092                51,960         .---    81.6             52.7                     72.4
          510,000             1,301,000          303,000             197,000              500,000                  383              386                      38.4
                                                ___~___-
          421,000               342,000           63,000             122,000               185,000                (79 7)            29.0                     541
       1,269,504             2,420,027          407,065             464,204               671,269                  35.4             36.6                     36.0

                                                                                          304,000                  17.8             41 .l                    21 3
                                                                                             4,224                 (1.6)              O.Ob                    (3 5y
                                                                                            83,855                35.8              520                      36.6
                                                                                          232,043                 283               81.9                     327
                                                                                                                     __~
                                                                                           183,000                42.6               (0.3)                   250
                                                                                          607.122                 27.7              24.5                     27.1

                                                 _-~-_-                  -~     -
          103,800               435,000             74,900            39,900               114,800                 22.6             384                      264
           11,100              (350,500)             (1,800)          11,400                 9,600                  0.58           102.7                     (2.7)
           28,300              (142,200)         -,ooo--                 500                10,500                 (5.9)             1.8                     (7.4)
                0                36,595               2,400                0                 2,400                  6.6                  .                    6.6
                0            (3,259,300)             (7,300)            (400)               (7,700)                 0 2"           OOb-                       0 2a
              (80’4             187,000             12,900            14,700                27,600                  6.9           (1637.5)                   14.8
          142,400           (3,093,405)            91,100            66,100               157,200                  (2.6)             46.4                    (5.1)8


             19 on.?\            91326             (82,348)            2,072                (8OYS6)               (81 8)            (220)                    (87 9)
            " ,Y""              , ,.,,...a          40,487            17,215                 57,702                484               28.0                     398
                                                _-__-                   .~~ -
           102,500               51,500             21,000           104,300                125,300               (41 2)            101.8                    243.3
            37,778               92,862             20,877            13,024                 33,901                37.9              345                      365
__..
            42,300              (16,200)               400            41,600                 42,000                (0.7)             98.3                   (259.3)
          234,675              364,553                 416          179,211                176,627                  0.3              75.9                     49.0

                                                                                                                                            ~...~_~
            (2.300)             (71,396)           (15,196)            9,000                 (6,196jPrn ---22.0"                   (391 3)                     8%
            &954’               ;50,138;            14,896             4,033                 18,929              (20.1)              16.8                   (37.8)
           (17,319)              19,959             65,951                 0                 65,951              176.9                0 0"                  3304
            (3,969)              96,462             10,278            21,697                 31,975               10.2             (546.7)                    33.1
            15,479               46,370            (15,600)              446                (15,154)             (50.5)               29                     (32.7)
                                                                                                                                                      (conlmed)




                                                          Page 67                                                         GAO/GGtKJO-69 Effective Tax Rates
Appendix VI
Cmnparison of U.S., Foreign and Worldwide
Effective Tax Rates by Industry and
Company for 1986




Thousands of dollars



                                                                    U.S. income
                                                                     before tax
  Vulcan Materials Company                                                147,804
  Westmoreland Coal Company                                                13,792
  Nacco Industrres, Inc                          -                         53,833
-Mrtchell Energy & Develo~e~t~Corp--                                       13,261
  Industry totals                                                        254,102
Motor vehicles:
  American Motors Corporatron                                             (54,151)
  Borg-Warner Corporatron-                                                1 6fl eno
  Chrysler Corporatron                                                  1,876,700
  Ford Motor Company                                                    4,003,100
  General Motors Corooratron                                              -7~14
                                                                            --, mn
                                                                                -- -
  Navrstar Internatronal Corporatron                                       (30,800)
  Paccar Inc.                                                               46,772
  Industry totals                                                      6,292,121
Paper and wood products
  Borse Cascade Corporatron                                              112,806
                                            .-                         ______.
  Champron International Corporatron                                     219,601
  Georgia-Pacrfrc Corporatron                                            462,000
                                                                       .____~
  Internatronal Paper Company                                            420,000
  Weyerhaeuser Company
  Industry totals
 -. __-.
Pntmlel,m’
  Agway Inc.                                                               19,024
                                                        .-
  Amerada Hess Corporatton                                               ?75.102)
  Amoco Company                                                          641,000
-Ashland Oil, Inc                                                        315,874
  Atlantic Richfreld Co. (ARCO)                                        1,012,000
  Chevron Corporation                                                   (157,783)
  Dramond Shamrock R&M, Inc                                               (30,100)
  Exxon Corporation                                                    2,399,ooo
  Mobrl                                                                 (511,000)
  Phillips Petroleum Company                                             (95,000)
  Shell Oil Company                                                    1,297,ooo
  The Standard 011 Company
                                                     ..____..       ..~.. (766,000)
                                                                                -
  Sun Company, Inc                                                         513,000
  Tenneco Inc.                                                             218,000




Page 68                                          GAO/GGD9649 Effective Tax Rates
                                                     Appendix VI
                                                     Comparison of U.S., Foreign and Worldwide
                                                     Effective Tax Rates by Industry and
                                                     Company for 1986




                                                                                                     Effective tax rate expressed as a percent
                                                                                                                      Foreign tax  Worldwide tax
         Foreign         Worldwide                                                                                         rate on         rate on
          income     income before       Current U.S.        Foreign tax       Worldwide tax      U.S. tax rate on        foreign       worldwide
       before tax               tax      tax expense           expense
                                                                -                   expense          U.S. income          income           income
              900           148,704                44,387             56              44443                  30.0              6.2             29.9
                0            13.792                 1.187              0                1.187                 8.6                 .             8.6
                                                             -..
                0            53,833                 3,746              0                3,746                 7.0                    .          7.0
                0            13,261                     0              0                    0                 0.0                    .          0.0
          16,745           270,647             109,649           35,232              144,661                 43.2            210.4             53.5


          (37,168)           (91,319)                0                  0                   0                 0.0"             o.oa              o.oa
           88,400           249,300             42,400             26,800             69,200                 26.4             303               27.8
          377,500         2,254,200             64,000            116,000             180,000                 3.4             30.7               8.0
        1.511.900
         ,~               5515.000             898.700            817.500           1.716.200      -         22.5             54.1              31.1
        1,372,900          1,662,500         (2,176,200)
                                                     --~         -524,200           (1,652,OOO)             (751.5)           38.2             (99.4)
           36,000              5,200                   0             7,000               7,000                 0.08           194              134.6
           15,339             62,111             16,257
                                                ___~                6,821
                                                                       ____~            23,078                34.8            44.5              37.2
       3,364,071          9.656.992         (1 ,154,843)        1.498,321             343.470               (18.4)            44.5               3.6

                                        ~---____                               .-
        56,350               169,156              8,632          .-23,0g8              31,730                  7.7            41.0              18.8
____-.  98,610              318,211               2.G               26,062             28,862      --          13             26.4               9.1
              0             462,000             79,000                    0            79,000                 17.1                .             17.1
        45,000               465,000            21,000 --           15,000             36,000                  5.0            33.3               7.7
         27,385              407,485            71,300               5,500             76,800                 188             20.1              18.8
       227,345            1,821,852            182,731             69,660            252,392                 11.5             30.6              13.5


                0             19,024                9,035                0              9,035                 47.5                   .          47.5
           81,993           (193,109)                 -0            40,358            -40,358                  0.0"           49.2             (20.9)
          907,000          1,548,OOO            (77,000)           537,000            460,000                (120)            59.2              297
           26,620            342,494 __~--        67,037             4,538            -71 j575                 21.2           17.0              20.9
          298,000          1,310,000           (723,000)            68,000           (655,000)                (71.4)          22.8             (50.0)
        1,563,OOO          1,405,217               (7,000)         973,000            966,000                   44a           62.3              687
                0             (30.1001              4.ooo                0              4.000                 (13 I_
                                                                                                                  31%             .            (13 3Y
        6,307,OOO          8,;06:000'           142,000          1,846,OOO          1,988,OOO                   59            29.3              22.8
        3.438.000          2.927.000            171.006          1.422.000          1 593.000                 (33.5)"         414               54.4
          752,000            657,000            193,000          - 429,000            622,000
                                                                                       ~~~__.-              (iO3 2ja          57.0              94.7
__~.             0         1,297,ooo             (17,000)           12,000              (5,000)               (1.3)            O.Ob              (0.4)
---       121,000           (645,000)          (738,000)            15,000            (723,000)               96.3"           12.4             112.ia
           87,000            600,000             (26,000)           49,000              23,000
                                                                                         ~~~~
                                                                                           ~~                  (51)           563                 3.8
                 0           218,000                     0              68                  68                  00             O.Ob               00
                                                                                                                                         (continued)



                                                      Page 69                                                       GAO/GGIXXM9 Effective Tax Rates
Appendix Vl
Comparison of U.S., Foreign and Worldwide
Effective Tax Rates by Industry and
Company for 1986




Thousands of dollars



                                                                    U.S. income
                                                           -         before tax
  Texaco Inc.                                                           (989,481)
  Unocal Corporation                                                     120,000
                                                               .-
  USX Corporation (U.S Steel)                                         (2,091,005)
  The Coastal Corporation                                                116,990
  Industry totals                                                     1,736,422
Pharmaceutrcals:
  Amencan Home Products Corporatron                                    1,008,799
  Bnstol-Myers Company                                                   684,700
  Johnson&Johnson                                                       (186,000)
  Merck&Co., lnc                                                         692,800
  Pfizer, Inc                                                           426,742
  Industry totals                                                     2,627,041
Retarlrno:
  American Stores Company                                                280,548
  Federated Department Stores. InC                                       522,441
  J.C. Penney Company, Inc                                               910,000
  K Mart Corporatron                                                     894,000
  The Kroger Co                                                            86,372
  Lucky Stores, Inc                                                         93,191
  Safeway Stores, Incorporated                                           154     83Rl
                                                                          \ - ---,
  Sears, Roebuck andTo                                                 1,610,600
  The Southland Corporatron                                              IA5- -, 975
                                                                                 - --
  Wal-Mart Stores, Inc                                                  811,558
  Industry totals                                                     5,339,797
Ruhher~
   The B F. Goodrrch Company                                               16,600
   The Frrestone Tire & Rubber Company                                    (29,000)
   Gencorp (General TIE and Rubber)                                        97
                                                                           -. ,___
                                                                               nnn
   The Goodyear Ttre and Rubber Company                                  321,900
~~.Premark  Internatronal. Inc
     _____..._~~                                                        (122,100)
  Industry totals                                                       284,400
Soaps and cosmetics:
  Avon Products Inc.                                                      86.000
  The Procter & Gamble Company                                           921,000
  Revlon Inc                                                             207,300




Page 60                                     GAO/GGD90-69 Effective Tax Rates
                                                      Appendix VI
                                                      Comparison of U.S., Foreign and Worldwide
                                                      Effective Tax Rates by Industry and
                                                      Company for 1986




___-
                                                                                                      Effective tax rate expressed as a percent
                                                                                                                       Foreign tax   Worldwide tax
         Foreign         Worldwide                                                                                          rate on          rate on
          income     income before       Current U.S.        Foreign tax         Worldwide tax      U.S. tax rate on       foreign       worldwide
       before tax               tax     tax expense            expense                expense          U.S. income         income           income
        2541,000          1,551,519                WOO)          1,065,000            1,062,OOO                 0.3"             41 9            684
       203,000              323,000--(222,oz)                         7,000            (215,000)
                                                                                      ~~-__                  (185 0)              3.4            (663
      (128,000)          (2,219,OOO)        (108,000)                (7,000)           (115,000)                5.2a              5 5"            5.2d
                                              __-
        21,800              138,790            12,000                      0             12,000                10.3               0.0             86
   16,219,413           17,955,635       (1,322,926)             6,460,964           5,136,036                (76.2)             39.6            26.6


          241,300         1250,099             498,007              135,528              633,535                494              562             50.7
                                         ._~-------.~                               ~~
          218,100           902,800            212,200               64,900              277,100                31 0             298             30.7
          553,000           367,000              31,000            213,000               244,000               (16 7)            385             66.5
          382,500         1,075,300             163,500      _---. 174,800               338,300                236              457             31 5
          491,700           918,442              33,142             147,400              180,542                 78              30.0            197
       1,666,600          4,513,641            937,649             735,626           1,673,477                  35.7             39.0            37.1


                 0           280,548             145,591                  0              145,591                51 9                 .            51 9
                 0           522,441             205,900                  0              205,900                394                  .            394
                 0           910,000             140,000                  0              140,000                15.4                 .            154
            77,000           971,000             320,000             23,000              343,000                35.8             29.9             353
                 0            86,372              70,410                  0               70,410                81.5                 .            815
                 0            93,191              36,100                  0               36,100                38.7                 .            387
           149,201            94,363              18,843             63,881               82,724               (34.4)            42.8             877
           124,400         1,735,ooo             270,600             43,500              314,100                168              350              181
             6,094           192,019              14.869              2,843               17,712                 8.0             46.7              92
                 0           811,558    _-.--    339,040                  0              339,040                41.8                  .           41 8
          356,695         5,696,492             1,561,353          133,224 -         13694,577                  29.2             37.3             29.7

                             __-.~               ~~
         45,800               62,400               21,100            28,000               49,100               1271              61.1             787
--~ ~ .~__                                                                  .-
         59,000               30,000               13,000            43,000                56,000              (448)             72.9            186.7
        9J$                  106,000               36,000             1,000                37,000               37 1             11 1             349
        112,300             434,200               (20,700)          104,500                83,800                (6.4)           93.1             19.3
         80,900              (41,200)
                                  -~               14,900            48,500                63,400              (12.2)            60.0           (153 9)
       307,000              591,400               64,300           225,000               269,300                22.6             73.3             46.9


          157,900            243,900               34,900            59,400              ~._94,300 .~..~_       406      ~   -   37 6      ~~   ~~~387
          239,000          1,160,OOO              166,000            72,000              238,000                1 8.             3~,~~-.           205
           21,300            228,600              102,800             8,400               111,200               49.6             394              486
                                                                                                                                           (continued)




                                                       Page 61                                                      GAO/G42LHhl-69 Effective Tax Rates
Appendix VI
Cmnparison of US., Foreign and Worldwide
Effectlve Tax Rates by Industry and
company for 1986




Thousands of dollars



                                                                     U.S. income
                                                                      before tax
  The Clorox Company                                                        159,275
- Ecolab Inc.                                                                58,277
  Industry totals                                                         1,431,052
Telecommunications
  American lnformatron Technologres Corporation                             2,005,200
-American Telephone & Telegraph Company                                          3,000
  Bell Atlantic Corporatron                                                  1,988,800
  Bellsouth Corporatron                                                     2,763,600
  Contel Corporation                                                           432,586
  GTE Corporation                                                            1,424,906
  Pacific Telesrs Group     -    -                                           1,826,OOO
  Southwestern Bell Telephone Company                                     -. 1,534,ooo
  United Telecommunrcations, Inc                                               314,383
-U.S. West, Inc                                                              1,528,OOO
  Industry totals                                                        13,020,475
Tobacco:
  American Brands, Inc                                                       427,044
  Phillip Morrrs Companres, Inc                                            2,189,OOO
  RJR Nabisco, Inc                                                         1,141,ooo
  Industry totals                                                         3.757.044
Transportatron Airlines
  AMR Corooration (Amerrcan Arrlrnes)                                       373 Rfil
  Delta Arr Lanes, lnc                                                         3,017
  NWA, Inc. (Northwest Airlines)                                              96,722
  Pan American World Airways, Inc.                                          (329,999)
  Predmont Avratron, Inc                                                     129.507
  Trans World Airlines, Inc                                          -      (106,328)
  UAL Corporatron                                                           (228,795)
  USAIR Grouo. Inc                                                           168.700
  Southwest Arrlrnes Co                                                       65,446
  Alaska Air Group, Inc.                                                      28.066
  Industry totals                                                           200,197
Transportation  Rarlroads
  Burlington Northern, lnc                                                  (455.163)
- CSX Corooration




Page 62                                           GAO/GGD9049 Effective Tax Rates
                                                                      Appendix VI
                                                                      Com~ariaon of U.S., Forei@~ and Worldwide
                                                                      Effective Tax Rates by Industry and
                                                                      Chnpmy for 1986




                                                                                                                             Effective tax rate expressed as a percent
                                                                                                                                              Foreign tax   Worldwide tax
          Foreian                  Worldwide                                                                                                      rate on          rate on
           income              income before                Current U.S.       Foreign tax          Worldwide tax          U.S. tax rate on       foreign       worldwide
        before tax                        tax               tax expense           expense                expense              U.S. income         income           income
              5,009                    164284
                                                                 _____
                                                                  46,332                1,238              47,570                           29 1           24.7                                        29 0
                                                                                                               __          --   __~--~.          ~.
-               14,014                  72,291-^---               23,684                6,005              29,689                           40.6           429                                        41 1
                                                                                                                                _,__                _ _~-._~.--                                   ~.-~
              437,223               1,869,075                   373,716              147,043              520,759                           26.1           33.6                                        27.9

__.__                                                          ~___--__-.-                                -~--~        -
                     0              2,005,200                    666,000                      0            666,000                       33.2                                   .                       332
__-                  0                  ~_____
                                        3,000                    269,000                  7,000            276,000                     89667                                  00"                     9200.0
.-__.                                        _____-
                     0              1,988,800                    754,300                      0            754,300                       37.9                                   .                       37.9
--___                                                                                ----
                     0              2,763,600                    7g2,,oo~--                   6-           792,100                       287                                    .                       287
                     n                4375Rf                    __-__
                                                                 129.075                    559            129,634                              79Fl
                      ”                                                                                                                         --          -
                                                                                                                                                                              O.Ob---~                -go0
                                        --,     -   -   -



               267,458               1,692,364                      30,129            154,117              184,246                               21                          576                        10.9
_____
                      0              1,826,OOO                     370.000                  0              37u,ouu                              203                                .                    20.3
                                                               A
                      0              , ,""
                                        G?Annn
                                           .,---                   _. -,. __
                                                                   7777nn                     0             272,700                             178                                .                    17.8
                      0                 314,383                   (82,712)                  0               (82,712)                   -__
                                                                                                                                         (26.3)                     -   -          .                   (26.3)
                                                               _~-___~-                                   _____~._~____~
                     0               1,528,OOO                    357,300                   0               357.300                       --71 A                                   .                    23.4
                                                                                                                     _-__
              267,450              14,087,933                  3,657,692             161,676             3,719,566                        25.7                               60.4                       26.4

               182,328                 609,372                    198,642              70,703              269,345                                   46.5                    388                        44 2
    .--___                                                     .____
               417,000               2,606,OOO                    624,000             222,000              846,000                                   285                     532                        32.5
                573,000              1,714,ooo
                                            -5,000                                     160,000                                                                               279                        27 1
                                                   _____                                                 - __-~-~               ---~--
             1,172,328              4,929,372      1,127,642                          452,703            4.,wrr,w--
                                                                                                            :nn qdr;                             30.0                        38.6                       32.1


                 41 866
             ---L--
                                       415,727                      (47,373)                                (46,787)             ~ -.~--(12.7)                                14                        (11.3)
                      II                 3017                 --~___(7.835)                    0             (7,835)                  135971
                                                                                                                                         I---                   1
                                                                                                                                                                                       .               1259.7)
                          0                   96,722                  20,791                 866             21,657                      21.5                                 0 Ob                       22.4
                                                                __-
               (141,939)               (471,938)                           0                   0                  0                       O.Od                                o.oa                        o.oa
    --___                                                                  ____---
                          n"            179507
                                         --, - -                      15146                     0            15,146                      11.7                                    .                       117
                          0            (106,328)                           0                    0                 0                                   o.oa                             .~ -               0 oa
                                                                                                                                                                            ~__               -~.~~       -~
                          0            (228,795)                     (70,526)                   0           (70,526)                                 30 8"                             .                 30.aa
                          0             168,700                          737
                                                               --___-__~~-                      0               737                                   0.4                              .                  0.4
                          0              65,446                        1,353                    0             1,353                                   71                               .                   2.1
                                            ~__
                      0                  28,066                         691                     0                691                                  75
                                                                                                                                                      &.”
                                                                                                                                                                                        .                    75
                                                                                                                                                                                                             -_




              (100,073)                100,124
                                             __                87,016)                   1,452              (85,564)                            (43.5)                        (1.5)' -~--(iE.)

                                                                                       __-
                          0            (455,163)                     18,015                    0             18,015                                   (4 0)                            .                 (4 q,,
                          0             747,000                      20,000    __~           ~ 0-            20,000                                    27                              .                  27
                                                                                                                                                                                                (contmued)




                                                                         Page 63                                                                                GAO/GGD.99-69 Effective Tax Rates
Appendix VI
Comparison of U.S., Foreign and Worldwide
Effective Tax Rates by Industry and
c4lmpany for 1986




Thousands of dollars



                                                                      U.S. income
                                                                       before tax
-~ Norfolk Southern Corporatron                                             819,971
   Santa Fe Southern Pacrfrc Corporatron                                   (527,900)
   Unwon Pacific Corporatron                                               (805,000)
  lndustrv totals                                                         (221.0921
Transportation  Trucktng
  Consolrdated Frerahtwavs Inc                                              130.445
  Federal Express Corporatron                                               174,144
  Roadwav Servrces, Inc                                                     124.964
                                                                          1,147,493
  Yellow Frerght System, Inc of Delaware                                    118,488
  Industry totals                                                        1,695,534
Uttlttres (electric and oast
   Amerrcan Electnc Power Company, Inc                                      996,023
   Commonwealth Edrson Companv                                            1.650.468
   Consoltdated Edison Company of New York, Inc.                            984,757
   Mrddle South Utrlrtres, Inc                                            1.105091
   Pacific Gas and Ele&c Company-
                               ~-~-.____ ~-                               1,951,121
   Publrc Servrce Enterprrse Group Incorporated                             780,572
--Southern Calrfornra Edrson ?%rnpr-                                      1.102.214
   The Southern Company                                                   1,638,242
                                       ~.___
   Texas Utrlrtres Comoanv                                                  966.503
  Industry totals                                                       11,174,991
Wholesalers:
-Alto Standard Corporatron                                                  123,836
   Avnet Inc                                                                 35.499
   Fleming Compantes                                                         75,251
   Genurne Parts Companv                                                    223.359
                                                                                .~
   McKesson Corporatron                ~._____                              132,700
--Super Valu Stores, Inc                                                    156,363
  Sysco Corporation                                                         102,233
  Wetterau Incorporated                                                      50,293
  Beraen Brunswia Corporatron                                                35 510
  Industry totals                                                          935,044




Page 64                                            GAO/GGLMO-69 Effective Tax Rates
                                                  Appendix VI
                                                  Comparison of U.S., Foreign and Worldwide
                                                  Effective Tax Rates by Industry and
                                                  Company   for 1986




                                                                                                    Effective tax rate expressed as a percent
                                                                                                                     Foreign tax  Worldwide tax
         Foreign           Worldwide                                                                                     r%te on           rate on
          income       income before      Current U.S.    Foreign tax          Worldwide tax     U.S. tax rate on        foreign       worldwide
       before tax                 tax     tax expense       expense                 expense         U.S. income          income           income
                0             819,971          163,358                 0             163,358                    19.9                 .            19.9
                  0          (527,900)          28,900                 0              28,900                   (5.5)                 .             (5 5)
                  0           (805,000)         20,000                 0              20,000                   (2.5)                 .             (2.5)
                                              ~
                  0          (221,092)        250,273                  0             250,273         .-     (113.2)’                 .          (113.2)8

            8,398               138,843         42,803
                                                A3 RM              5,975 ---
                                                                   5475          ~~ %.778
                                                                                      48778                     32.8             71.1             351
                0               174,144         69,595
                                                L.J,.w                  0v            69,595                    40.0                 .            40.0
-~-
                0               124,964
                                174 W A         41,145
                                                Al 14.5                  0            41,145
                                                                                      41145                     32.9      -          .            323
___-
___-
                 00          1,147,493
                             I,,,,,-,,"       306,917                    0           306,917                    26.7                 .            26.7
                  00            118,488
                                118,488         21,912     -             0            21,912                    18.5                 .            185
            0,390
            0.390           1,703,932
                            l-703.932         482,372
                                              _“_.“. ^             5,975
                                                                   -,-. -           408,347                     20.4      -      71.1             20.7

                  0           996,023          244,581                 0              244,581                   24.6                  .           24.6
                  0          1,650,468         213,045     -           0              213,045                   129                   .           12.9
                  0            984,757         383,800                 0              383,800                   39.0                     .         39.0
                  0          1,105,091               0                 0                     0                  -0.0                  .             0.0
            9,970            1,961,091         132,444             3,218              135,662                     6.8             32.3              6.9
                0              780,572         236,093                 0              236,093                    30.2                 .            302
~-
                0            1,102,214         349,034                 0              349,034                    31.7                 .            317
                 d           1,638,242          43,272                 0               43,272                     2.6                 .             2.6
                                                                                         ..-
                 0             966,503          44,010                 0               44,010                     4.6                 .             4.6
            9,970          11,184,961        1,646,279         -   3,218            1,649,497                   14.7              32.3             14.7

                 0             123,836           45,751              947               46,698                   369                O.Ob            37.7
             3,634              39,133           16,061            1,233               17,294                   45.2              33.9             442
                 0              75,251           30,273                0               30,273                   40.2      .-          .            402
             2,777             226,136           98,279            1,404               99,683                    4Gi              50.6             44.1
                 0             132,700        -45,200              1,800               47,000                    34.1              O.Ob            35.4
                 d             156,363          49,679                 0               49,679                    31.8      -              .        31.8
                 0             102,233          38,251                 0               38,251                    37.4                     .        374
                 0              50,293          16,626                 0               16,626                   33.1                      .        33.1
                  0             35,510           8,971                 0                8,971                   25.3                 .             25.3
            6,411             941,455          349,091             5,384              354,475                   37.3%             84.0%            37.7%
                                                    Vate shown IS arlthmetlcally distorted due to a book loss

                                                    bTaxes were pald or a refund was recewed although the company reported no income




                                                    Page 66                                                             GAO/GGD9949 Effective Tax Rates
 P

~*&~&uison of U.S., Foreign, and Worldwide
Effective Tax Rates by Industry and &npmy
for 1987
                Thousands of dottars


                                                                                                                   U.S. income
                                                                                                                    before tax -.
                                                                                 __--
                -e-----                             ~~                                                                 ~.~
                Aerospace: ~~                                                           p-p_--
                                       ~                                                                                $514,000
                  Allied-Signal Inc                  ~ p-__------                                                         603,000
                                                                   __pp.--~-                                         ~~-
                  The Boeing Company--                ~-~--                                                               592,400
                                                                   ___-.--.-..-                                      -_-
                  General Dynamics                ~-----
                                                                _~~-~                    ~                            -~ 714,000
                -Lockheed     Corporation
                                ~__             ~~~                                                                       356,710
                                                                  __~-          -~                           ~~~       ~-
                   Martin Marietta ~--
                                    Corporation~~~~ ~~--~                                                                  353,400
                   McDonnell Douglas COrpOratlon                           ___           mmm---.---
                                                                                                                         1,004,600
                   Rockwell International
                              ~-~-         ~Corporation
                                               ~~~                                                                         579,398
                   United Technologres COrpOratlon ~~~                                       .----
                                                                                                                       4,717,508
                 -~Industry total
                 Beverages:
                 ---.                                                                                                    1,016,100
                     Anheuser-Busch Companres. tnc         ~~~-      ~ ~~               ~~
                                                                                                                     .--.~.-222,078
                     The Coca-Cola Company        ~~_~          ~~~~                                                        117,915
                      Joseph E Seagram & Sons. rncpppppp.--m-.-                         pm-------                    ~--__
                 p__-_--.-                                                                                                  587,500
                   ~~Pepsico, Inc.
                               _.~-                                                                                          81,761
                      Adolph Coors Company                                                                              2,025,354
                     Industry total
                  Broadcasting:                          ~ ~~~      --.------~                                             511,378
                     Capital Crtres/ABC Inc                                                                                187.529
                   ~~-__
                                                                                                       -__
                  ~~ CBS
                     -__~ Inc. .~ ~~                                                                                     .-__92,054
                     MCA Inc                                                                                               314,846
                     Warner Communicatrons Inc
                                                                                                 ----1,105,807
                     Industry total
                   Chemicals.
                   --__                             ~~~~~                                                                  127,800
                      American Cyanamrd Company ~~~~~       ~-__
                    --__-.-                                                                                                919,000
                      The Dow  Chemrcal Company                                                                       -___
                             ____              ~ ~-~.~        ~ ~                                                        2,027,OOO
                      E I Du Pont De Nemours and   Company                                                                  .__
                   -__---                         mm~___.----                                                              408,000
                      Monsanto Company                                                           ~~_                 - ~..~._
                    -___---                   ~~~                                                                          212,000
                      Union Carbrde Corporation
                                                                                                                       ~_ 34,800
                      W.R Grace&Co                  ~~    ~~ ~~.~                                                       3,728,800
                      Industry total
                    Computers and __~~office equipment.
                                              ~~ ~                                                                            6,100
                     ____
                       Control Data Corporatron                                                         -__
                    -_.__--                 ~~     ~~ ~ ~~~~.         -__        _.~~                                       783,966
                       Drgrtal Equrpment Corporation
                                                                                                                            405,000
                       Hewlett~Packard Company




                                                                                        GAO/GGDSM9             Effective Tax Rates
                     Page 66
                                                Appendix VII
                                                Cmnparison of U.S., For&n, and Worldwide
                                                Effective Tax Rates by Industry and
                                                company for 1987




                                                                                          Effective tax rate expressed as a percent
                                                                                                           Foreign tax   Worldwide tax
  Foreign              Worldwide                                                                                rate on          rate on
   income          income before       Current U.S.     Foreign tax    Worldwide tax    U.S. tax rate on       foreign       worldwide
before tax                    tax      tax expense        expense           expense        U.S. income         income           income

    _~.~,
    $206000               $720.000 .~                       $66,000        $(150.000)             (42.0)%       -~ 320%             (20.8)%
                                    ___--~$(216,OOO)
              0            603,000          550,000               0           550,000              91 2               .              91 2
              0            592,400          630,500               0         -630,500              106.4               .             106.4
      12,000                726,000           17,000          9,000            26,000               24              75.0               3.6
                             _____
       7,370                364,080         142,170           3,780           145,950              39 9             51 3             ‘10.1
      47,000                400,400-~---5~00-~~00                              76,000              16.2             39.6             19.0
     135,000              1,139,600           66,900         46,900           113,800               6.7             34.7              100
    443,818               1,023,216         173,245         152,922           326,167              29.9             345              31.9
    851,188              5,588,898        1,421,215         297,202        1,718,417               30.1             34.9             30.9
                  .___
              0          1,016,100          320,900                0          320,900              31 6                 .            31.6
                                 .--
    1,053,729            1,275.807            49,851        457,059           506,910              224              434              397
      144,942              262,857           132,905         53,309           186,214             1127              36.8             70.8
      349,900              937,400          231,200          28,900           260,100              39.4              8.3             27.7
            0               81,761            28,227               0           28,227              34.5                 .            345
 1,548,571               3,573,925          763,063         539,268        1,302,351               37.7             34.8             36.4

            0              511.378          246,700                0         246,700               482                  .             48.2
                                                                                                                                .     ..~~
            0              187,529            46,800               0           46,800              250                  .             250
       87,700              179,754            23,800         23,200            47,000              259              265               26 1
       91,296              406,142             7,000         57,500           ~64,500               22              63.0              159
     178.996             1 s284.803         324.300          80,700          405,000               29.3             45.1              31.5

     233,800                361,600           15,400         105,100          120,500               121             45.0              33.3
    1,173,ooo             2,092.000         311,000          425,000          736,000               338             36.2              35.2
_   ~~___
  1,558,OOO               3585,000          850,000          995,000        1,845,000               419             639               51.5
                           ___--~
    251,000                 659,000           82,000          72,000          154,000               20 1            28.7              234
    176,000                 388,000         104,000           73,000          177,000               49.1            41.5              456
    210,300                 245,100           10,300          94,600          104,900               29.6            45.0              428
 3,602,100               7,330,700--1,372,700              1,764,700        3,1j7,400               36.8            49.0              42.8

       47,800                53,900            2,200          26.500           28,700               36.1            55.4              53.2
      856,315             1,640,281         264,966          200,416          465,382               33.8            23.4              284
      520,000               925,000          (15,000)        199,000          184,000                (3 7)          38.3              19.9
                                                                                                                               (continued)




                                                 Page 67                                                  GAO/GGD9069 Effective Tax Rates
Appendix VII
Comparison of U.S., Fore&n, and Worldwide
Effective Tax Rates by Industry and
Company for 1987




Thousands of dollars



                                                                    U.S. income
                                                                     before tax
  Honeywell Inc.                                          -              235,600
  International Business Machlnes Corp.                                2,890,OOO
                                                                         ^^_ ^_^
  NCR CorDoratIon                                                        XJl,bSb
  Unisys Corporation                                                     490,100
  Wang Laboratones Inc                                                   (237,800)
  industry total                                                       4,780,622
Constructlon:
  Centex                                                                    76.335
   Fluor                                                                 (153:307)
   Morrison Knudsen CorporaItIon                                           (14,068)
   Perin Corporatlon                                                        17,408
   PHM Corporation                                                           7,870
-~ U.S. Home Corporation                                                   (6,265)
   lndustrv total                                                        (72,027)
Electromcs and appliances
   Emerson Electric Co                                                    633,400
   General Electnc Companv                                              2,059,ooc I
   ITT Corporation                                                        855,228
   Lltton Industries, Inc                                                 189,415
   Motorola, Inc.                                                         226,000
   North Amencan Phillps Corporation                                       38,400
   Raytheon Company                                                       676,397
   Texas Instruments Incorporated           -.                            264,900
   Westinghouse Electnc Corporation                                       977,800
   Industry total                                                      5,920,540
 Flnanclal inshtuhons
    Bank of Boston Corporation                                            381,395
    BankAmerIca Corporation                                               410,000
    Bankers Trust New York Corporahon                                      18,06i
    The Chase Manhattan Corporation                                       643,915
    Chemical New York Corporahon                                         (926,614)
    Cltlcorp                                                          - 1,613,OOO
    Continental illinoIs Corooratlon                                     (621,100)




 Page 68                                         GAO/GGD90-69 Effective Tax Rates
                                                      Appendix VII
                                                      Chmarison of U.S.. For&m and Worldwide
                                                      Effective Tax Rat& by In&&y and
                                                      Company for 1987




                                                                 -_____.                      -~
                                                                                                                 Effective tax rate expressed as a percent
                                                                                                                                  Foreign tax   Worldwide tax
        Foreign            Worldwide                                                                                                   rate on          rate on
        income         income before       Current U.S.           Foreign tax        Worldwide tax            U.S. tax rate on        foreign       worldwide
     before tax                   tax      tax expense              expense               expense                U.S. income          income           income
        157,900              393,500              69,400                63,500                   132,900                 29 5              40.2                338
      5,683,OOO            8,573,OOO        -     10,oO~~            3,005.000                 3,015,ooo                   03              529                 35.2
        563,569              771,225              97,216~              248,962       .~          346,178                 468               442                 449
                                                __-
        433,300              923,400             164,600               192,400                   357,000                 33.6              44.4                38.7
        185,600               (52,200)               300                20,200                    20,500                  p 1)             10.9               (39 3)
     6,447,404            X&228,106             593,682             3,955,970                 4,549,660                  12.4              46.8                34.4


                 0             76,335              11,626
                                                 .~~-                           0                   11,626                152                  .               15.2
            31,729           (121,578)              (8,069)                (4,718)                 (12,787)                5.3a            (149)    .~-~~      105"
             5,337              (8,731)          - 14,154                   1,068                   15,222              (100.6)             200              (174.3)
-1.315                         18,723                7,429                  2,044                    9,473                427              1554                50.6
                 0              7,870                4,143                       0                   4,143                52.6                  .              526
                 0              (6,265)             (2,970)                      0                  (2,970)               47.4a                 .              474a
           36,381             (33,646)             26,313                  (1,606)                 24,707                (36.5)'            (4.2)             (73.4)


           146,000            779,400            233,700                60,400                    294,100                 369               41.4               37.7
                                                      ~-_____~
           517,000          2,576,OOO            956,000               197,000                  1,153.OOO                 464               381                448
           383,005          1,238,233            167,388               184,450                    351,838                 196               48.2               28.4
            44,352            233,767             17,419                13,659                _    31,078                  92               308                133
           173,000            399,000             33,000                26,000                     59,000                 146               15.0               14.8
                 0             38,400---          38,300.                       0                   38,300                99 7                  .              99 7
             9,027            685,424             294,568                   6,900                  301,468                435               76.4               44.0
           150,000             414,900             80,000              45,000                     125,000                 302               30.0               30.1
            67,600           1,045,400             790                 34,700                     111,200                  78               51.3               10.6
         1.469,964          73410,524           1,696,875             566,109                  2,464,964                  32.0              38.1               33.3

                                     __-.           -~      __
          (448,668)            (67,273)            25,493                  62,845                   68,338                  67             (140)             (131.3)
         (1,335,000)          (925,000)            13,000               52,000                      65,000                 32               (3.9)               (7 0)
            215,548            233,610             90,012               61,983                     151,995               4984               288                65 1
         (1.379,847)          (735,932)            10,023              127,729                     137,752                 16               (9 3)             (18.7)
            178,300           (748,314)                 0               64,300            -         64,300                 0 0"             36.1                (8.6)
         (2,004,OOO)          (391,000)            56,000              736,000                     792,000                 35              (36 7)            (202.6)

.~       -~-.21,400           (599,700)                   0                 9,400                    9,400                  0 0"            439                 (1 6)
                                                                                                                                                        (continued)




                                                         Page 69                                                                 GAO,‘GGD90-69 Effective Tax Rates
                                                                                                                               -

Appendix VII
r~,~,~~arim~ of U.S., Foreign, and Worldwide
Effective Tax Rates by Industry ad
company for 1987




                                                                                                                  U.S. income
                                                                                                                   before tax
 ~-~                                                                                                                        225,800
    First Bank System                                               __--_-
                      _~           _ -p-_--                                                                                 299,240
                                                               __         ~--~---                      -~-             -__
    Frrst Chicago CorpOratlOn ~ ---                                                                                        (778,642)
    First Interstate Bancorp                                              ._~                     .-
                         _     ~~ ~. m_------
                                                                    ___p_--.-_                                         ~_-. 512,700
    J,P, Morgan & Co        Incorporated
                      ~_~~ ~~ -. ~:.~-                                                                                   (1,021,529)
    Manufacturers Hanover Corporation                                                                                      (449,950)
    Manne Midland Banks,   _~ Inc.~-                                ---
                                                                                                                            (359.000)
     Mellon____
             Bank Corporation         - ~ --~                                                                                (21,600)
     Norwest Corporation
                    ~              ~~                                                                                      (198,200)
     Security Pacific Corporatron
                            ~~   ~~  ~_ -~--e----
  _-__--                                                                                          ---                   ~- 458,900
     Wells
  ___-.     Fargo   &
                    __Companv  ~ ~~                                                                                        (401,781)
     RepublicBank                                    ____                    _-.~-          ___----
                 __~~Corporation~~~~ - ~--.                                                                                 509,103
                                                                                                                   .--.---
     PNC Financial Corporatlon                                                                                               86,441
  --_---                          ~~                                                                         ---
     Bank of New _~~-England Corporation
                                    ~-                                                                                      380,140
   --___
      Industry total
                                                                                    -__---                                 _
   Food processors                                                                                                          453,762
     Archer-Camels-Mrdland       Company
                                   _~~~_-~                  _-.--                         -----                             311,652
                                                                             -          ~.                           -_.
   -Borden, Inc.                       ~~ ~~-.~                                                                             333,950
       CPC lnternatronalinc                                 _______----
   __                                                                                                                        377,700
                                                                                                                                  -
       General Mulls, Inc                                        ~ _-~
                                                                _-__-_-                                                  ~_- 312,600
   __._IC Industries. ~Inc -~        _ -_---                                                                                 516,700
                                                                                                                                  -
       Kraft, Inc __~              -----.                                                                                    317,900
                                                                                                                               ~-
        The Pillsbury
                 ~_    Company ~~ ~-                      ---                                                                217,500
    ~~-.-
        The Quaker Oats Company ~~~ -~                _ -_-_-___                                       ---.---
    ~.-_.-            --~                                                                                                    220,600
        Sara Lee Corporatron                                                                                                  344,800
    -_                                                                                                                         ~-
        Campbell Soup Company                                                                                                 504,700
    -._--                 ~-~      ~-
                                                             -__-~p-_-_                                               --(121970)
     ----Kellogg Company           ~-                                                                                      ~--
         Swrft Independent    Packrng                  eA-.-._---
     ~~___~~               -   ~~ -~ company
                                          ~--.                                                                                 (23,325)
         United  Brands   Company     -~~   ~_      -----                        ---.
     _       _.~~                                                                                                          3,875,569
        Industry total
    Glass, concrete, abrasrves. and gypsum.                                                       _       -.--~-~.2~300~
      Manville Corporation ~~~ -~                             ___            _ .~-.----.-250,000
     ~__._~_~
      Owens-Corning      Fiberglas~~~
                                    Corporation                     _.       _-_          p------
                  ~_                  -~--~-.-                                                                               (75,400)
       Owens-lllinols, Inc               --.----                    __~~
    ~_-              ~~                                                                                                      417,590
                                                                                                                  _~      ~~ ~-    ~
       PPG Industries.
             _ ~~ -~Inc               ~-----.--




                                                                              GAO/GGD-M9                         Effective Tax Rates
       Page 70
                                                                  Appendix M
                                                                  Comparison of U.S., Foreign, and Worldwide
                                                                  Effective Tax Rates by Industry and
                                                                  company for 1987




                                                                                                            ______.
                                                                                                               Effective tax rate expressed as a percent
                                                                                                                                Foreian tax    Worldwide tax
         Foreign       Worldwide                                                                                                    rite on           rate on
          income   income before                        Current U.S.           Foreign tax    Worldwide tax U.S. tax rate on        foreign       worldwide
       before tax             tax                       tax expense              expense            expense     U.S. income - ~~__income             income
         (181,200)         44,600                              4,400                 3,800.--     ---8,200                1.9            (2 1)            18.4
                   (952,000)            (652,760)              6,900                        17,900                        24,800     _--.-.          2.3              (1 9)                 (3 6)
                     48,619             (730,023)            (14,900)                       18,000                         3,100                     1.9"             37.0                  (0.4)
                                                                                                                           -__-
                   (275,700)             237,000             73,500-                       209,600                      283,100                     14.3             (76.0)                119.5
                                                                                                                                                       __.-
                   (211,110)          (1,232,639)              3,666                        46,139                        49,805                    (0 4)            (21 9)
                                                                                                                 .~~   ~~                                                              _-~ (4.0)
                      1,816             (448,134)----~Gz~                                    1,808                        (2,146)                    0 9”            99.6                    0.5a
                   (492,000)            (851,000)          (55,000)                  -__-~4,000                          (51,000)                   153a             (0.8)                   6.0a
                          0              (21,600)           10,900                        1,200                           12,100           --(50.5)"                  0 Ob                     (56.0)
                                                                                                                        ~~-~                       -.. __.-
                     62,100             (136,100) -63,800                               15,500                            79,300                     (32 2)          250                       (58.3)
                   (543,700)             (84,800)         218,800                       14,400                           233,200                      47 7           (2.6)                    (275.0)
-.                                                --      ___~-
                   (294,000)            (695,781)          (45,807)                          4,195                       (41,612)                   11 4a             (1 4)                      6.0"
                   (201,574)             307,529 -110,843                                    2,998                       113,841                    21 a              (1.5)                     37.0
                                                                            ___.-                          -.~                                                                         .__-
                75,962                   162,403              65,846                         5,195                        71,041                    762                68                      43 7
                       -
           (7,715,054)                (7,334,914)           633,522                 1,456,992                          2,092,514                  166.7              (18.9)a                  (28.5)a

                                 n”      “G17C3              1x Qc;,                                   n                 176,957                    39 0                    .                   39 0
-          ~____

        117,104                          428,756 --          220,300                    40,600
                                                                                      __-~                               260,900                    70.7              34.7                      609
        214,500                          548,450             104,700                   136,500                           241,200                    31 4              63.6      __--            440
 ______
         25,900                          403,600__~        - 160,800                         9,100                       169,900----26                        -__-    351                       421
_--___
                                                                                            23,100                       145,400                    39.1              43.4
______ 53,200                            365.800             122,300                                                                -.__                                                        39 7
        202,400                          719,100             139,500                        89,700                       229,200                    270               443                       31.9
                     79 Ann
                     -u,   ,uu
                                         341 ?Jln
                                         -     ,__”           79 mn
                                                               _,__l                         7 A00
                                                                                              ,   --
                                                                                                                          87000
                                                                                                                          - /---                    25.0              31.6                      25.5
                                                                                     _--


               -124.000                  341.500              73,400                        41,900                       115,300                    33.7              33.8                      33 a
                 - - -, 927
                 7n5    ---              476577
                                          .-_,_--            111 ,--.
                                                                  RfC                       79 493                       191 293                    507               386                       44.EI
                                                                                                                                                                      ~~..__-
                   62,100                406,900              70,400
                                                           ~ -__                            14,900                        85,300                    20.4              24.0                      21 0
                 145,100                 649,800             189,500                        44,900                       234,400                    37.5              309                       36.1
                                 0           (12,970)                   0                              0                        0                    0 0"                   .                    0 0"
__-
                 128,914                  105,589                2,692                   44,553                            47,245                  (11.5)             346                       44.7
                                                             --.-                   __
              1,302,540                5,178,109           1,451,949                   532,146                         1,984,095                    37.5              40.9                      3ti.3

                                                                                                                                                                                   __--
                     74,030              277,126              22,663                        29,796                        52,459                    11 2              40.2                      18.9
                                       ____
                     59,000              309,000             123,000                        25,000                       148,000                    49.2              42.4                      47.9
                      86,500              11,100               (7.300)                      21,500                        14,200                     9 7a             249                      127.9
                    197,300              614,800             151,000                        85,400                       236,400                    362               43.3                      385
    __-~             .~
                                                                                                                                                                                   (contmued)




                                                                       Page 71                                                                             GAO/GGD90439 Effective Tax Rates
Appendix M
employ      of US., Foreign, and Worldwide
Effective Tax Rates by Industry and
Company for 1987




 Thousands of dollars


                                                                           U.S. income
                                                                            before tax
                           ~ ~-~                                                 272,393
   1 ICC Corporation                                                             1,067,569
        9tr~ total
 Instrument companies: ~ -_-----                                                  1,239,620
    Eastman Kodak Company                                                            68,494
    General Signal Corporatron                                                      850,000
    Mrnnesota Minrng & Manuf&turing       Company                                    (44,000)
    Xerox Corporatron        ~-                                                       21,200
    Polarord Corporatron    ~~ -~                                                2,135,314
     Industry total
  Investment companies _..~~ _.---                                                  1,263,OOO
  -American     Express Company ~---                                                  111,132
     First Boston, __~~
                   Inc.      ~~                     .__                               322,546
     Merrill Lynch &.-~Co Inc
                           ~~ ~_-                                                      4,000
     Salomon Inc.                                                                    566,000
     Federal National                                      -__
                     __ Mortgage   Assocration
                            ~. ~_.~-                                              2,266,676
     Industry total
   Metal manufacturing.     ~~~ --                                                    187,400
      Aluminum Company
                     _~     of
                             .~~America
                                 --     (ALCOA)                                         20,400
   -.
      Armco Inc.___         p--_--                                                     (23,700)
   ____
      Bethlehem Steel CorpOratlOn
                            ~~ -            ---                                         96,237
      Inland Steel Industries, Inc.                                                   518,OOO
    -~__                                                                     -
      The ITV Corporation                                                             107,300
       Reynolds Metals _~~
                        Company
                             _~ _-                                                    905,637
      Industry total
    Metal products:        ~~. ~--                                                      70,405
    - Crown Cork & Seai Company,
                            ~~ -   Inc.                                                107,200
                                                                       -
      The Gillette Company _~~-                                                         65,856
      Triangle Industries,
                       _~ Inc
                            ~~ -_                     --
                                                                                        47,500
       Emhart      --    ~~                                                            110,050
       The Stanley Works    _~~-                                                      401,011
       Industry total
     Mining:
     -__                                                                               348,580
        Freeport~McMoran, -.-~
                             Inc --                                                    (11,267)
        Inspiration Resources
                     __     ~_ Corporation
                                 -                                                     213,325
                                                    __-                      -.--
        Newmont Mrnrng Corporatlon                                                     170,248
      _-_-_-                 .-~ _~                                          ---
         Phelps Dodge Corporatlon                   -.-




                                                           GAO/GGD9069 Effective Tax Rates
     Page 72
                                                  Appendix VU
                                                  Comparison of U.S., Foreign, and Worldwide
                                                  Effective Tax Rates by Industry and
                                                  Company for 1987




__-
                                                                                                   Effective tax rate expressed as a percent
                                                                                                                    Foreign tax  Worldwide tax
        Foreign            Worldwide                                                                                    rate on          rate on
         income        income before     Current U.S. Foreign tax           Worldwide tax       U.S. tax rate on        foreign       worldwide
      before tax                  tax    tax expense ._ expense                  expense           U.S. income          income           income
           78,036             350,429          89,609          33,331
                                                                 .          ~~-     122,940
                                                                                  ~~~~                     32.9             42.7              351
          494,666           1,562,455         370,972         195,027              573,999                 35.5             39.4              36.7

           697,000           1,936,620        321,000         244,000               565,00()               25.9              35.0             292
                                                                                                  -__
            23,699              92,193         24,880           10,042                34,922               36.3              42.4             37.9
           656,000           1,506,OOO        395,000         267,000                662,000               46.5              40.7             44.0
           538,000             494,000               0         121,000               121,000                0 oa             22.5             245
           132,000             153,200           2,000          32,300                34,300                 9.4             24.5             22:
         2.046.699          4.182.013         742.800         674,342             1,417,222                34.0              32.9             33.9


          (640 0001           623.000-         259.000         80.000               339,000                20 5             (12.5)             54.4
             (4,073)          107,059           56,686             81                56,767                51.0              (2.0)             53.0
~-
            56.900            379.446              472         18,653                 19,125                01               32.8               53
           240,000            244,000         (199,000)        76,000              (123,000)             (4975.0)            31.7             (50.4)
                  0           568,000          203,000               0              203,000                35.7                  .             357
                                               _-__
          (347,173)         1,921,505         320,158         174,734               494,892                14.1             (50.3)'           25.8


           314,000            501,400           44,500         122,600              167,100-~    ____~      237              39.0              33.3
-__
            27,200             47,600          (99,100)          8,100               (91,000)             (485.8)            29.8            (191 2)
__-.
             6,100            (17,600)        (122,000)            500              (121,500)              514Ea               8.2           690.3a
                 0             96,237          (15,445)              0               (15,445)              (16.0)                .           (16.0)
___--.                                 ___-
.~                0           518.000           11.800             800                12.600                 2.3               O.Ob      ___- 2.4
           157,600            264,900            5,900          33,400                39,300 ~~~-~~          5.5             21.2             14.8
           504,900          1,410,537         (174,345)       165,400                 (8,945)              (19.3)            32.0              (0.6)
                                                                                         ~~ ___
            87,300            157,705           34,949          24,258                59,207                496              278         __~~ 37.5
           276,400            363,600           58,600         107,500               166.100                54 7             38.9             43.3
~-~
            61,157            127,013           61,208          20,825                82.033 _~--.          929              34.1             64.6
           137,200            184,700            2,500          36,600                39 100                 53              26.7        -    21.2
            49,346             159,396          29.102          22181                51.283                 26.4             44.9             32.2
           611,403          1,012,414          186,359        211,364               397.723                 46.5             34.6             39.3

                                                                                                                                        ~~
             68,047           416,627           39,293          29,431                68,724                11.3             43.3              16.5
             29,896            18,629          (16,800)                 0            (i6.800)              149v                0.0            w:g
           250,405            463,730           26,235           7,397                33,632                123                3.0              73
             60,509           230,757            4240           22,963                27203                  2.5             37.9              11 8
                                                                                                                                        (contmued)


                                                    Page 73                                                        GAO/GGlMO89 Effective Tax Rates
                   __-.
Appendix W
Comparison of U.S., Foreign, and Worldwide
Effective Tax Rates by Industry and
Company for 1987




Thousands of dollars



                                                                           U.S. income
          __       -..--       ._                                           before tax
  Unwon Texas __
               Petroleum-~~Holdrngs, Inc                                            (85,499)
  Vulcan Materials Company ---.-~-~----                                             171,051
                                                                                        -
  Westmoreland Coal Company
~____                                                                               (38,539)
  Maxus Energy Corpotatron                                                         (493,300)
  The Loursiana Land & Exploratron Company                                          25,000
  Industry total                                                                   299,599
Motor vehrcles-
--Chrysler Corporatron                                                          1,826.200
                                                                                 __-
   Ford Motor Company                                                           a 283 700
   General Motors Corporatk                                                      1,304,700
   Navistar lnternatronai Corporatron                                               97,900
   Dana Corporation -
~~~-__-.                                                                           166,292
   Fruehauf Corporatron                                                            (67,630)
   Paccar Inc                                                                      114,917
  Industry total                                                                8.726.075
Paoer and wood nroducts
                                                                           .-__~
  Borse Cascade Corporatron                                                         229,893
  Champron International Corporabon                                                 490,377
                                                                         ____
  Georgia-Pacrfrc Corporatton-m ~~ ~--       --__--~       -                        750,OQO
                                                                                   __~
   International Paper Company                                                      620,000
  Weyerhaeuser Company
~-.-__~~             _
  Industry total

  Aawav Inc

  Amoco Company
  Ashland Oil, Inc.                                                             161,742
~~Atlantrc
    ~___~~_.Rrchfreld Co. (ABCO)                                              1,766,OOO
                                                                         __~__-
  Chevron Corooratron                                                           571 AM
                                                                                   -.   .,   Iyv




  Exxon Corporatron                                                             2 425,000
  Mob11                                                                           286,000
                                                                                .__
  Phrllrps Petroleum Company                                                     (323,000)
  Shell Oil Companv                                                             1 7% nnn
  Sun Company, Inc                                                                 392,ooo
                                                               ~~__
  Tenneco Inc                                                                     (354,000)
  Texaco Inc.                                                                   (6,459,408)




Page 74                                                GAO/GGD90-69 Effective Tax Rates
                                                           Appendix W
                                                           ComparLBlonof U.S., FOR&II, and Worldwide
                                                           Effective Tax Rates by Industry and
                                                           ckmpany for 1987




                                                ---
                                                                                                                 Effective tax rate expressed as a percent
                                                                                                                                  Foreign tax  Worldwide tax
            Foreign          Worldwide                                                                                                 rate on         rate on
             income      income before Current U.S.                 Foreign tax         Worldwide tax          U.S. tax rate on       foreign       worldwide
          before tax                tax tax expense                   expense                expense              U.S. income         income           income
             385,292            299,793        4,366                     285,415               289,781                       (5.1)               74.1                     96.7
                  64            171,115                 55,065                 44               55,109                       322                 68.8                     322
__-                                                     ____                                                                                   _____
                   0            (38,539)                   1,312                0                  1,312                     (3.4)a                  .--__---              (3.4)
                                                       --                                -~.~.- __-             -I                  -.__
             45,900            (447,400)                       0           55,600                55,600                       0.0s              121 1                    (12.4)
               8,600             33,600                   (5,500)           1,800                 (3.700)                   (22.0)               20.9                    (113)
            646,713          1,146,312                106,211            402,650                  510,661                   36.1         -XT                              44.5

             295,500          2,121,700             216,000               (47,000)                  169,000                  118                 (15%                      8.0
                                                                                                                                 --
           2,311,700          7,595,400           1,*                     854,000                2,120,300
                                                                                               -~__-                         240                  36.9                    27.9
           1,627,900          2,932,600          (1,303,800)             (329,700) -~         -(1,E3,500)---                (99 __-__
                                                                                                                                9)               (203)                   (55.7)
-             45,000            142,900              48,000                17,000                    65,000                  49 __----
                                                                                                                                0                 378                     45.5
                                                                                                ~. -_--
--            49,077            215,369              48,959                23,110 -                  72,069                  294                  47.1                    33.5
                                                                                                                          -____
              (11,341)          (78,971)-^--7                               4,595                    16,602~__-.            (17 8)               (40.5)         __--~    (21 0)
               38,684           153,597                 50,407             15,790                    66,197                  43.9                 40.8                    431
                                                                                                                                                   ____
           4,366,520        13,062,595                337,073            537,795          ~~      iiE$G-                      3.9                 12.3                     6.7

                                                                                                                                                   --__
               79,670           309,563               7,636-               35,694                    67330                   13.8            448                          21 8
                                                                                                                                    -~____
             137,842             628,219               6,945               44,419                    51,364
                                                                                                 -'.---                       1.4            32.2
                                                  _-                                                                 _-__-__   --.-                                        8.2
                    0            750,000            243,000                     0                  243,000                   32.4                .                        324
               71,000            691,000              53,000               15,000                    68,000                   85             21.1                          98
                                                  _--                                                                          ___~     --__
              113,663            695,123            123,800                 3,800                  127,600                   21 3             3.3                         184
             402,175          3,073,905            458,381                 98,913                 557,294                    17.2            24.6                         18.1

                    0            34,731          5,012                          0                     5,012                  14.4                     .                   14.4
     -_                               ___--__-                                                     ~--__-___
             264,241            249,951         17,660                    110,002 -                127,662                 (123.6)                41.6                    51- 1
                                                                                                                                __--              __~           _--.~-
            1247.000          2.480.000        378.000                    608,000                  986,000                   30.7                 48.8                    39.8
               27,574            189,316         (11,830)                      6,135     ~~          (5,695)                 (7 3)              22 2                       (3.0)
              332,000          2,098,OOO        600,000                      54,000                654,000                   34.0               163                        31.2
            2,095,ooo          2,466,400        239,000                  1,308,OOO               1547,000                    644                624                        627
                                                                                                                                                ____
            5343,000           7,768,OOO        569,000                  1,983,OOO               2,552.OOO                   23.5               37 I                       32.9
            2,682,OOO          2,968,OOO          96,000                 1.4m,ooo                1,516,OOO                   33.6               529                        51 1
              571,000            248,000 ---ixO%p                          181,000
                                                                                ---                204,000                    (7 1)             31.7                       82.3
                     0         1,736,OOO          61,000                       4,000                65,000                     35                 O.Ob                      37
              182,000            574,000          16,000                     80,000                 96,000                     4.1              440                        167
                                                                           ~-                   ~~~~..                                         -.----~--                    -~
               92,000           (262,000)              0                           60                    60                    o.oa
                                                                                                                                         __-.__ 01                          0 oa
            1,932,ooo         (4.527,408)       227,000                  1,172,OOO               1,399.000                    (3 5)             607                       (30.9)
                                                  -- -__                   ---
                                                                                                                                                                   (conttnued)



                                                               Page 76                                                             GAO/GGB9069 Effective Tax Rates
Appendix W
Comparison of U.S., Foreign, and Worldwide
Effective Tax Rates by Industry and
company for 1987




Thousands of dollars



                                                                              U.S. income
            ~-~                                      __..~.                    before tax
  Unocal Corporatron         ~.-~~__                                                     (90,000)
  USX Corporation (U S Steel)                                                            317,000
  The Coastal Corporatron                                     __-~                       140,540
  Kerr-McGee Corporation                             _________~                          141,000
  Farmland Industries, Inc                                                              55,188
  Industry total                                                                    I,91 9,903
Pharmaceuticals                                            -     ~-~
  American Home Products Corporation         ~~__~_____                                 1,006,004
  Srrstol-Myers Company                              ~.~                                  835,700
  Johnson&Johnson                                                                         424,000
  Merck&Co., Inc                                                                          826,600
  Pfizer, Inc.                                                            __-~-           396,607
   Industry total                                                                   3,480,911
RetailIng:                                                                              ~-
 -.American Stores Company -~ .____~..                                                   264,936
   Federated Department Stores, Inc.                           __~_~..                   486,282
-J C Penney Company, Inc                                                                 870,000
   K Mart Corporatton                                                                 1 ,011,000
   The Kroger Co.                                                                 -~- 297,084
   Lucky Stores, Inc.                                                                    201,561
   Safeway Stores, Incorporated
                             -~  ___~.                                                 (720,387)
   Sears, Roebuck and Company
                                                                                  .~- 1,603,800
-~ The
    .___Southland Corporatron                                                           (173,602)
    Wal-Mart Stores, Inc       -                                                      1,024,944
   Industry total                                                                    4,866,610
 Rubber:
    The Frrestone Trre & Rubber Company                                                 63,000
                              ~  ~~.
    Gencorp (General Tire & Rubber)                                                     14,000
 -The
 -~     Goodyear Tire & Rubber Company                                                 590,500
    Premark International, Inc                                                           6,700
                                                                                  .~.-
    Rubbermaid Incorporated                                                            132,930
   Industry total                                                                        807,130
 Soaps and cosmetrcs
   Avon Products Inc                                                                         183,600
   The Procter & Gamble Company                                                              442,000
                                                                                  ~.-              ~~




 Page 76                                                   GAO/GGD96-69 Effective Tax Rates
                                                            Appendix VII
                                                            Comparison of U.S., Foreign, and Worldwide
                                                            Effective Tax Rates by Industry and
                                                            company for 1987




                                                                                                           Effective tax rate expressed as a percent
                                                                                                                            Foreign tax   Worldwide tax
          Foreign       Worldwide                                                                                               rate on          rate on
           income   income before              Current U.S.         Foreign tax      Worldwide tax      U.S. tax rate on        foreign       worldwide
        hdn,P +z4‘1
        I-.-.-         .I_
                               tar       .“_
                                               tax Plne”bA
                                               .-_.
                                                   --r-----           expense             expense          U.S. income          income           income
                   340,000          250,000           -(48,000)            84 nnn            xnnn
                                                                                             -“,vII
                                                                                                                    513a
                                                                                                                    --.-
                                                                                                                                          747                144
                   (62,000)         255,000           -~ 6,000             10,000
                                                                          ~~                  16,000                       19             (;6.&        ~.     6.3
                    39,600          180,140              (21,000)               0            (21.000)              (14%                     00              (117)
                   \.(11 ,___,
                         nrn        .__/___
                                    lxlml___ 50,ooo                         6,000             56,000               35 5                   (54.5)             431
                             0       55,188                  361                0                361                 07                         .             0.7
                                                         ~__         ..__~_
        16,074,415               16,893,318           2,207,203       7,026,197           9,233,400               121.3                    46.6              54.7

                   278,900        1,284,904             259,088           160,789           419,677                   258                 577                327
                   244,000         1,079,700            298,900           103,000           401,900                   358                 42 2               37.2
                   759,000         1,183,OOO             40,000           378,000           418,000                    9.4                49.8               353
                   571,300         1,397.900            255,200           274,200           529,400                   309                 48.0               37.9
-.~
                   580,500           977,107            124,707           139,400           264,107                   31 4                24.0               27.0
                                                                                                                                               ~-
                 2,433,700        5,922,611             977,095         I,0557389         2,033,284      ~___-~-~ 28.0                    43.4              34.3

                          0          264,936          130,563                   0           130,563                 49.3                        .            49.3
                          0          486,282          197,300                   0           197,300                 40.6                        .            406
                                             __~
                          0          870,000         413,000                    0           4w-            .~___~_. 475                         .            475
                     89,000        1,100,000         371,000              25,000            396,000                 36.7           -81                       360
                                                                                                 ~-~.
                          0          297,084 ~        77,667-         __--      0             77,667                26.1                        .            261
                                                                                                                                                       ~-
                          0          201,561            57.800                  0             57,800                28.7                        .            287
                                                                                             ~..~
                   594,492          (125,895)           45,078             78,018           123,096                  (6.3)                 131              (97.8)a
                                             ~.___
                    170,000        1,773,800          597,400              53,700           651,100                 37.2                   31.6              36.7
                      5,912         (167,690)          (34,886)             3,105            (31,781)               20.1a                  525               190"
~-...
                          0        1,024,944          388,407                   0           388,407                 37.9                       .             37.9
                                                                .~~..-~~
                   859.404        5.725.022        2.243.329             159.823          2.403.152                   46.1                 18.6              42.0

                    136,000         199,000               15,000           98,000            113,000                23.8                   721               568
                      5,000          19,000               59,000 -~~~       2,000    -~       61,000               4214                    400              321 1
                   301,400          891,900               (2,400)         162,800            160,400                 (0.4)                 540               180
                    109,200         115,900               25,100           57,000             82,100               374.6                   522               70.8
-~                    9,606         142,536               56,326            2,769             59,095                42.4                   28.8              41.5
                   561,206        1,368,336             153,026           322,569           475,595                        19.0            57.5              34.8

                    190,400         374,000               91,400            64,300           155,700                       498             338               41 6
                    165,000         607,000              228,000        TEzioo-              323,000                       51 6            57.6              53.2
                                                                                                                                            ~--~.
                                                                                                                                                      (continued)




                                                              Page 17                                                           GAO/GGD-99-69 Effective Tax Rates
Appendix VII
Comparison of U.S., Forei@, and Worldwide
Effective Tax Rates by Industry and
cmlpany for 1987




Thousands of dollars



                                                                                     U.S. income
                                                                                      before tax
   Revlon, Inc.                                                                            293,600
   The Clorox Company -                     ___-__                                         165,483
--Ecolab Inc.                                                                               90,716
  lndustrv total                                                                        1.175.399
Telecommunrcations.
   Amerrcan Information Technologres Corporation                                         I,848500
--American Telephone & Telegraph Company                                                 3,049,ooo
   Bell Atlantic Corooratron                        _____                                1.877.200
                                                                                               ,~.
   Bellsouth Corporation     ~-___                                                       2543,500
- Contel Corporation       - .~~________                                                   119,594
   GTE Corporation                                    ___                                  862,499
   Pacific Telesrs Group                                                                 1,431,ooo
   Southwestern Bell Telephone Company                                                   1505,500
   Unrted Telecommunrcatrons, Inc          .-___-__       ____                             155,964
   US West, Inc                                                                          1,523,200
  Industry total                                                                       14,915,957
Tobacco:                       ~~-___
   Amencan Brands, Inc                                                                     505,985
-~ Phillip Morns Compantes, Inc.              ___..~_                                    2,727,OOO
                                                                                         -___
   RJR Nabrsco, Inc.                                                                       943,000
  Industry total                                                                        4,175,905
Transportation - Airirnes     __
   AMR Corporatton (American Airlines)                                                      289,586
- Delta Air Lines, Inc.                                                                     435.677
   NWA, Inc. (Northwest Arrlrnes)                                                           167,905
   Pan American World Arrways, Inc.                                           ___.
                                                                                           (288,077)
   Trans World Airlrnes, lnc                                                         .--__ 105,188
   UAL Corporation                                                                       - (25,599)
   USAIR Grouo, Inc                                                                         248.377
   Southwest Arrlines Co -~                             --.                                 28,713
   Alaska Air Group, Inc                                                                    20,036
   Midway Arrlines, Inc. -~~
-.______                                                                                    19,207
  Industry total                                                                        1.001.013
                                                                                             ,
Transportation - Railroads-
                                                               ~.__
  Burlington Northern, Inc                                                                 656,081
  CSX Corporation                                                                          686,000




Page 78                                                       GAO/GGD-99-69 Effective Tax Rates
                                                            Appendix VII
                                                            Canparison of U.S., Forei@t, and Worldwide
                                                            Effective Tax Bates by Industry and
                                                            company for 1987




                                                                                                                 Effective tax rate expressed as a percent
                                                                                                                                  Foreian tax   Worldvvide tax
       Foreign                 Worldwida
                                      I”..                                                                                            rate on          rate on
        income             income befL.-
                                      nre        - _.._... U.S.
                                                Current    _._.     Foreian
                                                                     . - _ tax
                                                                            .~         Worldwide tax           U.S. tax rate on       foreign       worldwide
     before tax                       tax       tax expense           expense               expense               U.S. income         income           income
          AElm-l”
         TY,““”                   342,200                119,100             20,100               139,200                  40.6             41.4                 40.7
         10,271                   175,754                 55,339                957                56,296                  334               93                  32.0
           (355)                   90,361                 44,641            ~ 659      ~~          45,300                  49.2           (185.6)    -TE
       413,916                  1,589,315               538,480            181,016               719,496                   45.8             43.7                 453

                          -~
                  0              1,848,500              727,500                   0               727,500                  394
                                                                                                                           __                   .                39.Lr
                  0              3,049,ooo              432,000              12,000               444,000           -~--   14.2              O.Ob                14.6
                                                                                                                           365                  .
              0                  I[ ,377,200        685,400                      -.0              685,400                                                         36.5
              n"                 2,543,500 ~----~~- 892,800                        0               892.800                 35 1                 .                 351
               0                     119,594          37,351                  3,236                  40,587                31 2              O.Ob                 33.9
        268,069                  1,130,568          140,255                 163,022                303,277                 16.3             608                   26.8
                  0              1.431.000          484,000
                                                     -~       -~                  0                484,000                 33.8                 .                 33.8
                  0              1,505,500          363,300                       0                363,300                 241                  .                 24.1
               0                     155,964         (59,270)                     0                 (59,270)               (38 0)                .               (38.0)
               0                  1,523,200         512,000                       0                512,000                  33.6                .                 336
        268,069                15,184,026              4,215,336
                                                          ~~        -       170,258             4.393.594                   20.3            66.5                  28.9

         310,638                    816,623               197,547            101,263               298,810                 39.0              32.6                36.6
         464,000                  3,191,ooo               607,000            173,000
                                                                        -~_______-     ~~          780,000                 223               37.3                24.4
         796,000                  1,739,ooo               370,000            235.000               605,000                 39 2             -29 5                348
.~
      1,570,638                  5,746,623             1,174,547            509,263             1,683,610                  28.1             32.4                 29.3


            32,247                 321,833                32,177                                    33,010                  11 1              2.6                 103
                  0                435,677---             56,228
                                                              ~                    0                56,228                  129                  .                12.9
                                    167.905
                                       ,~                 28.217               2,022                30,239                  168               O.Ob                18.0
             14,003                (274,074)                    0                226
                  0                 105,188               66,200                   0                66.200                  629                  .                62
                  0                  (25,599)              5,500                   0                  5,500                (21 5)                .               (21.5)
                  0                 248,377               31,410                   0                31,410                  12.6                 .                12.6
                  0                   28,713              11,343                   0                 11,343                -39 5-----            .                395
                  0                   20,036              17,856                   0                 17,856                 891                  .                89.1
                  0                   19,207               7,910                   0                  7,910                 41 2                 .                412
            46,250               1,047,263               256,841               3,081               259.922                  25.7              6.7 --~--           24.0
                                                                                            -

                      0            656,081                 73,736                  0                 73,736                 11.2                .                 11.2
                      0            686,000         -       24,000              6,000                 30000                   3.5              O.Ob                 4.4
                                                                                                                                                           (continued)



                                                              Page 79                                                             GAO/GGD99.69 Effective Tax Rates
Thousands of dollars
          __~~                       ~~-


                                                                                          U.S.income
                                                                                           before
                                                                                           -_~-   tax
                                                                    _----
           -__----             ~~~. _----                                                            250,775
                                                                                 --
    Norfolk Southern__COrpOratlOn
                          pm~----                                                                    566,800
 --
    Santa Fe Southern Paclflc COrpOratlOn                                                            887,000
- llnion Pacrfrc Corporation         -.__                                                        ‘“,“--,---
                                                                                                   4 nAPI 666
 - Industry total
                                                                                            --
 Transportatron - Truckrng                                           .~                             109,694
    Consolidated Freightflays. tncpe_-__-                                                          (153,616)
    Federal Express COrpOratiOn                                -_                                    75,263
                                                                                            --
   -__                                                                                              987,774
    United Parcel _~~~      of America, rnc
                   Service ~~~~~~                                                                    62,518
    Yellow Freight System, Inc ~~_
                                 of Delaware                                                      1,081,833
    Industry total
                                                            ~-                              __--
  Utrfitres (electric and gas)                                                                       874,435
   American ___   Electnc Power   Company                                    -
                            ~~~ .~~   -~---- Inc.                                                  1,592,265
     Commonwealth
            _----        Edrson
                              ~~Company                                                              914,024
  ~__                                        New York, Inc.
     Consolidated      Edrson Company
                   ~.~~~~        ~~~     ot --_--                                     -722,907
  -M~rldle South Utilltles, InC
     Pacific Gas and Electric tiompan
                                   ~.~~_.~ ncorporated                                              ---
                                                                                                      ”   .-,   .--




      Prrhlrc
        --     Service  Enterpnse  Group   t                                                        1,113,287
      Southern Calrfornla E&son Lamp        rany
   -__p--p~                           ~~ ~               ___-                                       1,013,771
      The Southern Company                ------                                                        963,706
      Texas Utilitres~~~~
                        Company         -_---.     ---                                             9,096,107
   %dustry           total
   Wholesalers                                                                                         124,491
                                                                                            --        -__
        Alto Standard Corporation                ~.                                                       42,757
   -__--                 ~~
        Avnet, Inc.                                   __-                                                 75,317
                                                                                            __--
        Flemrng Companies                              ___--                                            244,048
   ___~.~            ~~-~                                                                    -
        Genuine Parts Company        ~~ ~_~      --                                                      158,900
    ------                                                                                  ---
        McKesson Corporation
                        _          ~-----                                                                172,631
         Super Valu Stores, Inc                                                                          116,212
         Sysco _~~~
                Corporation      ~~~~                                                                      57,149
     --                                                                                              ---
         Wetterau
     ____~          Incorporated      pm-e---                                                              30,862
         Bergen Brunswrg Corporatron                                 -__
                                                                                                     1,0225%
         Industry total




                                                                            GAO/GGDSM9    Effective Tax Rate%
      Page 80
                                                Appendix VII
                                                Compariscm of U.S., Foreign, and Worldwide
                                                Effective Tax Rates by Industry and
                                                company for 1987




                                                                                                Effective tax rate expressed as a percent
                                                                                                                 Foreign tax  Worldwide tax
        Foreign        Worldwide                                                                                     rate on           rate on
        income     income before        Current U.S.     Foreign tax      Worldwide tax       U.S. tax rate on       foreign       worldwide
     before tax               tax       tax expense        expense             expense           U.S. income         income           income
                                                                                                                                     ___-
              0           250,775            194,208                0              194,208                   77.4                    .           77.4
              0           566,800             95,300                0               95,300                   16.8                    .           16.8
              0           887,000             88,000                0               88,000                    9.9                    .            9.9
              0        3.046.866            475.244            6.000              481.244                    16.8               O.Ob             15.8


          9,464           119,158             37,420           6,820                44,240                   34.1              721               37.1
                                                                                    ~~~~.____
              0          (153,616)
                          __________.         86,790                0               86,790                   (56.5F-               .             (56.5y
               0           75,263             26,327                0               26,327                    35.0                 .              35.0
               0          987,774            169,183                0              169,183                    17.1                  .             17.1
                                                   ___
               0           62,518             12,060                0      -        12,060                    19.3                  .             19.3
          9,464         1,091,097           331,780            6,820              338,600                     30.7             72.1               31.0


              0            874,435           273,397                  0           273,397                    31.3                  .             31.3
~.
              0          1,592,265           193,302                  0           193,302                    12.1                  .             12.1
              0            914,024           326,000                  0           326,000                    35.7                  .             357
              0            722,907            10,138                  0             10,138                    1.4                  .              1.4
                                                                   -.             ~~~
          6,446          1,058,676           252,262            1,725             253,987                    24.0        -~    26.8              24.0
              0            849,482            26,450                  0            26,450                     31                   .              31
              0          1,113,287---        395,064                  0           395,064                    35.5                  .             35.5
              0          1,013,771           119,299                  0           i19,299                    11 .a                  .            11.8
               0          963,706             42,889                 0              42,889                     4.5                   .      ~~     4.5
          6,446         9,102,563          1,638,801           1,726            1,640,526                    18.0              28.8              18.0
                                                    ~~__~
              0            124,491             37,996
                                             .~-                3,873              -41,869                    305                0 Ob             336
          1,295             44,052             12,693             397               13,090                    29.7              30.7              29.7
              0             75,317             29,593               0               29,593                    39.3                  .             39.3
          1,812            245,860             93,752             899               94,651                    38.4              49.6              38.5
              0            158,900             57,700           2,500               60,200                    363                O.Ob             37.9
                                 .-___
               0           172,631             88,950               0               88,950                    51 5                  .       ~-    51.5
                                 ____
              0            116,212             48,633               0               48,633                    41.8                  .             418
               0            57,149             24,014               0               24,014                    420                   .             42.0
               0            30.862--           10,079                0               10,079                   32.7                  .             327
          3,107         1,025,474            403,410            7,669             411,079                     39.5%           248.8%              40.1%
                                                 ?%te shown IS arlthmetlcally d!storted due to a book loss

                                                 bTaxes were pad or a refund was received although the company reported no income.




                                                 page 81                                                             GAO/GGDS9.69 Effective Tar RaIxs
Major Contributors to This &port


            1
General Government                Administration Issues
Division, Washington,           John P. Hutton, Assignment Manager
                                Charles Kilian, Advisor


-or-in-Charge
Detroit     Regional   Office   Brenda J. Trotter, Site Senior
                                Colleen Rohrer, Evaluator
                                Cynthia Giacona-Wilson, Evaluator




 (263339)                        Page 82                             GAO/GGD90-69 Effective Tax Bates
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