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Most Corps. Paid No U.S. Taxes in Late 90s

WASHINGTON, April 1- Most American and foreign corporations operating in the United States paid no income tax between 1996 and 2000, government auditors said Friday.

Using data collected by the Internal Revenue Service (news - web sites), the auditors found that 71 percent of foreign corporations paid no federal income tax. During the same time, 61 percent of American corporations paid no income tax.

Among the largest corporations, American businesses were more likely to avoid taxation than foreign businesses.

The study was done by the General Accounting Office (news - web sites), the investigative arm of Congress.

Investigators also looked at companies that paid less than 5 percent of their total income in tax.

In 2000, the most recent year for which data was available, an estimated 94 percent of American corporations and 89 percent of foreign corporations paid less than 5 percent of their total incomes in taxes.

The two Democratic senators who asked the GAO to study corporate taxation said the results expose gaping loopholes in the tax system.

"They don't pay their fair share, and the net result is that average taxpayers — working families — wind up paying more to make up that difference," said Sen. Byron Dorgan, D-N.D. "That's not fair or right."

Companies might not pay taxes in a year because they lose money or carry forward operating losses from previous years. New companies often owe no tax because their expenses are higher than those of more mature companies.

Researchers also found that companies improperly reduce or eliminate their tax liabilities by fallaciously pricing transactions among subsidiaries in different countries.

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