Here is activision 2017 Year end financial statement:
https://investor.activision.com/static-files/ace1c2fc-c2c8-4461-b9fe-157d7fd1e9c2
Here is the link to the article Jim is referencing:
https://itep.org/notadime/
For the year end 31 Dec 2017 they paid: $878 Million in Taxes at a effective rate of 76%
What happened is this:
Business pay income tax on profits, not revenue.
Revenue - expense = profit.
Imagine you have a business. You made $1000 in income in January. But it costs you $800 to make that $1000. You take home $200 at the end of the day. That's your income which should be taxed.
Yes companies like Activision make billions in "revenue" but they also have expenses as well. I find it weird Jim only refers to Revenue and not profits.
Profits was $1.15 billion out of $7 billion. You can make massive revenue but if your profits are tiny your taxes will be tiny.
Okay so we can also see that Activision has a subsidiary overseas where they "parked" some of their profits. In effect delaying when they pay income tax.
In 2017 there was a once-off lower rate of tax on Repatriated earnings of foreign subsidiaries. So Activision made use of this to bring back overseas profit at lower tax rates.
That was in 2017.
Now Jim's article is refers to tax effect of 2018
Here is the link to 2018 quarterly results:
https://investor.activision.com/financial-information/quarterly-results
And link to 10-K 2018:
https://investor.activision.com/static-files/0f4309eb-c4a5-4bb3-a2b8-d589caf16417
On Page 139 shows that they made pre-tax profits of $1.8
Of which $432 Million was domestic. Presuming US.
Overall current tax was: $34 million while federal tax was -$228 million.
The data set that the article Jim used was referring to this "-$228" of federal tax.
In the 10-K the tax break down shows:
Federal income tax provision at statutory rate: $ 394 21
State taxes, net of federal benefit: 36
Research and development credits: (46)
Foreign rate differential: (198)
Change in tax reserves: 265
Audit settlements: (115)
(Net operating loss tax attribute assumed from the Purchase Transaction ___
Excess tax benefits related to share-based payments: (58)
U.S. Tax Reform Act: (285)
Change in valuation allowance: 61
Other: 10
Income tax expense: $ 64
Main reason for Activision "not" paying US tax is due to U.S tax reform act and foreign rate differential.
Foreign rate differential is rebate for paying tax to foreign governments.
And U.S tax reform act from what I'm reading is due to the remeasurement of deferred US tax on foreign profits to GILTI rates(global intangible low-taxed income). And remeasurement of deferred taxes to new corporate tax rates.
So to anyone, correct me if I'm wrong as I didn't study US tax law but from what I'm seeing:
-Tax on Foreign profit decreased due to US tax reform act and the deferred tax they had on balance decreased therefore They got a massive Tax benefit out of it.
Which led to tax rebate in the 2018 year.
In the end Activision do pay taxes. They just used the tax law to their advantage to gain maximum deduction.
If you read the article Jim refers to, you will see that the companies take advantage of tax credit such as alternative energy tax subsidies. Which is good thing to motivate companies to use renewable energy.
So there is more to dig through but from this I think the conclusion is that:
Is it morally/ethically right to give these companies certain tax credits?
Is it right to give CEO such massive bonuses which is usually in the form of stock options which is also tax deductible?
