October 23rd, 2007 08:19 EST
Wal-Mart's Tax-Dodging Schemes Exposed
Washington, D.C., Tuesday, October 23, 2007 – Today's Wall Street Journal reports on Wal-Mart's aggressive tax dodging schemes that have enabled the company to pay corporate taxes at half the average state rate for the last decade. These complex tax schemes have attracted the attention of state legislatures around the country, and they're at the heart of a North Carolina lawsuit challenging Wal-Mart's abusive tax shelters. Documents from the North Carolina lawsuit, obtained by the Wall Street Journal, expose Wal-Mart's systematic and legally-questionable attempts to pad its bottom line at the expense of individual state taxpayers.
Excerpts and the full story are below.
* "At least one gathering, according to an internal Ernst & Young calendar, took place in Wal-Mart's headquarters in the 'Tax Shelter Room.'"
* "In 2002, for example, the accounting firm delivered a 37-page proposal laying out a smorgasbord of 27 potential tax strategies, most tailored to a particular state's tax code. It described one of them as 'a very aggressive strategy with considerable risk.'"
* "One of the proposals was accompanied by the following warning: 'Note that in a 'post-Enron' environment and amidst the focus on 'tax haven' operations, this strategy is expected to get more scrutiny by the IRS, as well as some states.'"
* "David Bullington, Wal-Mart's vice president for tax policy, said in a deposition that he began feeling pressure to lower the company's effective tax rate after the current chief financial officer, Thomas Schoewe, was hired in 2000. Mr. Schoewe was familiar with 'some very sophisticated and aggressive tax planning,' Mr. Bullington said, according to a transcript of the deposition, taken by the North Carolina attorney general's office in July. 'And he ride herds [sic] on us all the time that we have the world's highest tax rate of any major company.'"
* "As Ernst & Young worked on its proposals, one high-ranking tax partner sent an email to a colleague addressing a concern often faced by companies: how to describe a tax-driven transaction in a way that won't create problems later on with tax authorities. 'You asked if we have a document that details how the tax savings will work, how much they will save....We really don't have anything like that except for the sales document, partly because we have avoided calling this a 'tax' project, to show that we did not have a tax savings motivation, rather it is a 'domestic restructuring' project,' he wrote."
* "After Wal-Mart hired the firm in 1996 to implement the REIT strategy, an Ernst & Young tax executive urged his team to be discreet, according to a staff memo included in North Carolina court records. 'We don't think there is much the state taxing authorities can do to mitigate these savings to Wal-Mart, however some states might attempt something if they had advance notification,' he wrote. 'We think the best course of action is to keep the project relatively quiet....there just seems to be too many opportunities for it to get out to the press or financial community and we all know they are difficult to control, particularly when we are dealing with a client as well-known as Wal-Mart.'"
Inside Wal-Mart's Bid To Slash State Taxes
Ernst & Young Devises Complex Strategies; California Pushes Back
By JESSE DRUCKER
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