BP Used Oil Industry Tax Break to Write Off Its Rent for Deepwater Rig
Monday 05 July 2010
by: Pat Garofolo | ThinkProgress | Report
Transocean, the company that owns the failed Deepwater Horizon rig that caused the Gulf oil spill, used well-known tax havens in the Cayman Islands and Switzerland to lower its U.S. corporate tax rate by almost 15 points. And due to a break in the U.S. tax code, BP was also allowed to write off the rent it paid to Transocean on its own tax bill, saving it hundreds of thousands of dollars per day:
The owner, Transocean, moved its corporate headquarters from Houston to the Cayman Islands in 1999 and then to Switzerland in 2008, maneuvers that also helped it avoid taxes. At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began.
So, essentially, the U.S. taxpayer paid BP to lease a rig that was incorporated in a foreign country for the purpose of avoiding the U.S. corporate tax. And the U.S. tax code is actually riddled with breaks for the oil industry, despite that industry’s record profits in recent years. Center for American Progress Senior Policy Analyst Sima Gandhi has counted nine different subsidies that the U.S. government gives to the oil industry, including refunds for drilling costs and refunds to cover the cost of searching for oil. If this corporate welfare were cut, it would save $45 billion per year, and according to the Office of Economic Policy at the Department of Treasury, “affect domestic production by less than one-half of 1 percent.” “The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Sen. Robert Menendez (D-NJ). “There is no reason for these corporations to shortchange the American taxpayer.”
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Comments
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I wonder what would happen
Mon, 07/05/2010 - 15:46 — Jordan (not verified)I wonder what would happen to the price of heating oil, gasoline, lubricants and such if subsidies to the oil industry were stopped. How high would the price of gasoline go and how loudly would the public(me included)moan if we had to pay for unsubsidized gasoline? And isn't the money for subsidies derived from the taxes we pay to government?
and you thought people,
Mon, 07/05/2010 - 16:18 — mike hunt (not verified)and you thought people, fascism was just something from the past..well open your eyes and brain cells because its back again..bp dictates to the once great united snakes..bought all the scum in our senate..and the rest of the pathetic house of whores reprehensibles..it dont take a weather man too know which way the methane fumes blow..it was done on purpose..bp..your dead meat...
Jordan: Oh poor baby, you
Tue, 07/06/2010 - 06:20 — Kitty Tanaka (not verified)Jordan:
Oh poor baby, you might actually have to adjust your lifestyle to accomodate reality instead of having the harsh truth shielded from you by the government the right wing wants to not interfere in the free market.
So which is it? Do you want the government to interfere in the "free market" or not? Why shouldn't the oil companies compete on their own and let the customer decide whether or not to pay what they charge when the true price of gasoline hits the market?
When gas hit $5 a gallon, people started to make changes. They dumped their pickups and SUV's and looked into moving into the city to avoid their long commutes. They started buying hybrids and efficient cars. The took an interest in alternative fuels.
All the changes people claim are impossible and unfeasible, started materializing from the blue en masse when the gasoline prices hit a price point the market didn't want to bear. That's the free market in action! And it's what happens when the market is allowed to work without well-connected businesses getting government interference in the market to prop up failed business models that are outmoded and outdated.
Deal with it.
OK that makes a lot of sense
Tue, 07/06/2010 - 10:57 — Jo Denny (not verified)OK that makes a lot of sense now. I like it.
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its horrible that the oil
Tue, 07/06/2010 - 12:12 — Anonymous (not verified)its horrible that the oil companies are getting tax breaks with our tax payer money! Oil dependency is killing our economy!
Fact of the matter, Kitty,
Tue, 07/06/2010 - 12:59 — A Person (not verified)Fact of the matter, Kitty, you're absolutely right. The true-free market.. but we don't have that, now do we. I'm one for realizing what we have now, and seeing it through til the end. Face the facts, if not many people are going to buy gasoline in this country, then this country's officials will add more of the tax payer money towards that fund. Yes, essentially the "Free-Market" will show those gasoline tycoons. Although then again, What about the farmers, what about the produce and food that will arrive on your shelves? It's not all about going to work, and commuting.
Although I guess paying 10 dollars for a gallon of milk would be fine, oh that's right.. screw it, we won't pay for it; Damn, starving is going to be amazing.
:D
It doesn't help either
Tue, 07/06/2010 - 13:10 — Anonymous (not verified)It doesn't help either Switzerland as such - the pensions have to cover the stock market index (SMI), and the stock value of Transocean is lowering every day. The only ones are the shareholders in the last few years who could cash in..
You speak as if there aren't
Tue, 07/06/2010 - 23:19 — Kitty Tanaka (not verified)You speak as if there aren't alternatives, despite that I listed quite a few of them. Do you really think we have to ship everything over highway by truck, or do domestic travel by air, rather than europe and asia who have figured out the fact that trains are vastly more efficient? For that matter, do we have to do all our dairy farming in one place and ship the products thousands of miles? Is there a reason we couldn't locate smaller regional dairy farms around the country to reduce shipping distances?
Just like the people selling SUV's and suburban and exurban homes and looking to get into smaller, more energy efficient vehicles and move closer to work, these changes are possible, they just have to have an economic incentive.
If you're so concerned though, why not give those fossil fuel subsidies directly to the people, and let them decide how to spend it? Maybe they'll use it to offset fuel costs so they don't have to change their lifestyles any, or maybe they'll decide to make those changes so they can pocket the money instead.
The oil industry has NO right to beg for OUR taxpayer money to prop up their business. End the oil subsidies NOW!
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