Walmart CEO, Others Call For Lower U.S. Corporate Taxes
In testimony Wednesday before the U.S. Senate Committee on Finance, the president and CEO of Walmart joined several other chief executives in calling for modernizing the country's tax code and in particular, significantly reducing corporate tax rates to a level competitive with other countries. Walmart's Mike Duke said that his company paid an effective corporate tax rate in 2010 of 32.2 percent, while the average tax rate in developed countries around the world is 25.1 percent. Duke also said that the U.S. system of taxing corporate profits globally, rather than the territorial system used by other countries, hurt the ability of U.S. companies to compete.
"My advice to this committee is straightforward: lower the corporate rate as much as you can, make the tax base as broad as you can, and move to a territorial system as quickly as you can," Duke said.
Duke was one of four CEO's to testify before the Senate committee, which was examining how the U.S. tax code affects hiring and economic growth. The others were Thomas Falk, the chairman and CEO of consumer goods maker Kimberly-Clark; Gregory Lang, the president and CEO of chipmaker PMC-Sierra; and Larry Merlo, the president and CEO of drugstore and healthcare provider CVS Caremark.
In his remarks, Duke noted that Walmart paid $4.7 billion in corporate taxes in the U.S. in 2010, equivalent to about 3 percent of all the corporate income taxes paid in the U.S. "We need a rate that is meaningfully lower [than the average U.S. rate of 39.2 percent] in order to spark investment and job creation," Duke said. As an example of how the territorial system hurts U.S. companies, he said that when Walmart competes against a foreign company like Tesco in the U.K., Tesco and Walmart both pay 26 percent in taxes on profits to the U.K., but then Walmart has to pay an additional 9 percent to the U.S. government. As a result, Walmart is often outbid for specific retail sites in other countries.
Kimberly-Clark's Falk said that in addition to a lower corporate tax rate and a territorial tax system, he supported a simplified tax code that would be less expensive and time-consuming for corporations to adhere to. PMC-Sierra's CEO noted that it costs roughly $1 billion more to start and operate a chipmaking plant in the U.S. versus somewhere abroad primarily because of taxation differences, and that the U.S. needed strong and permanent tax incentives to encourage more technology research and development in the U.S. And Caremark's CEO said the key factor that would allow his company to accelerate its investment in jobs and infrastructure would be a reduction in the top corporate tax rate.
Responding to a question from the finance committee's chairman, Senator Max Baucus, Walmart's CEO said his company would be willing to forego most if not all the other tax benefits his company received in exchange for a reduction of the top corporate tax rate to a figure in the mid-20's. Duke also said that he thought the effect of a U.S. debt default, and resulting higher interest rates, would be "devastating" for U.S. consumer confidence.
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