Transcript: ConocoPhillips CEO James Mulva’s testimony on Big Oil tax subsidies
“We currently hear a lot about the so-called tax subsidies. This calls for another reality check. The major companies do not get special subsidies.”
“One proposal would only impact the three major oil companies that already carry the heaviest burdens and further restrict the foreign tax credits that are available to us. So it’s seriously undermining our ability to conduct business internationally.”
“There is a great deal of misinformation about our tax liabilities, and unfortunately it’s being used to justify further increases.”
Full Transcript of the May 14th Testimony:
Chairman & CEO
Good morning, Chairman Baucus, ranking member Hatch, and committee members.
My hope today is to bring clarity to this vital debate on tax policies regarding the major oil companies.
To begin, there is a great deal of misinformation about our tax liabilities, and unfortunately it’s being used to justify further increases. So my objective is to convey first the realities of our current tax burden and second the negative impacts of new proposals, for there would be impacts to our company, our industry, the American consumers, U.S. job creation, and national energy security.
So let’s take a look at what we already pay. The chart we’re pointing to it shows the effective worldwide tax rates of the 20 largest U.S. non-financial companies. And there are a lot of familiar names on this chart. On average, the group paid 27% for the years 2006 to 2010. But look at those three in red…
[Verbal listing of companies on charts omitted.]
You can see at the top, ConocoPhillips 44%, then followed by the two international American companies. The three major U.S. oil companies [ConocoPhillips, Chevron, ExxonMobil] already pay the highest effective tax rates in the top 20. And keep in mind that this is after taking the available tax deduction credits.
What does this mean in hard dollars? Well, for our company, we earn $11.4 billion last year, and we paid $8.3 billion in income taxes as well as $3.1 billion in other taxes. So our total worldwide taxes paid actually equaled our income. So any fair-minded person would likely agree that we pay our full share.
Remember too that companies like ours carry the flag of U.S. competitiveness into the battle for global business, and everyday we fight for access to energy resources and opportunities around the world. Our rivals are typically nationally-owned companies from other countries, and they literally dwarf us in size. Some are dozens of times bigger than we are, and they enjoy explicit support from their governments. Despite these compelling numbers and despite the need to maintain a competitive U.S. oil industry, some would have us pay even more. In fact, one proposal would only impact the three major oil companies that already carry the heaviest burdens and further restricts the foreign tax credits that are available to us. So it’s seriously undermining our ability to conduct business internationally. That’s because when we decide how much to pay for foreign energy opportunities, we have to include taxes among the total project cost when we can make these investment decisions.
So all else being equal, overseas companies with lower tax obligations can outbid us and win the opportunities. And unfortunately, this does impact U.S. jobs.
For our company, we operate worldwide with 29,000 employees, which 20,000 are right here at home. Some of them, 3,000 U.S. based employees work to support what we do internationally around the world.
So reducing our foreign tax credits will have a cascading effect on our business. We would lose projects and opportunities to foreign competitors. Cash flows that would otherwise generate tax revenue here would instead go elsewhere. Our U.S. job creation and investments would suffer.
Further as profitability decline, it would reduce our ability to invest in domestic energy, and ultimately, we can even see more energy and development here conducted by foreign competitors, which by the way would inevitably send dollars back to their home countries.
We currently hear a lot about the so-called tax subsidies. This calls for another reality check. The major companies do not get special subsidies. In fact, some deductions and credits available to the industry are not allowed to the three major companies. And the ones we are allowed to match or closely mirror those available to all U.S. companies. Even in these cases, the law limits how much we can benefit. That hardly sounds like special industry subsidies.
Congress and the administration often speak of enhancing the U.S. competitiveness, but enacting the foreign tax credit restrictions and other proposals would be very counterproductive. They would penalize U.S. workers and the American public that invest in our shares, and they would harm the well-being of companies like ourselves that must carry our country into the energy future. And that certainly cannot be your intent. So I urge you to objectively and dispassionately consider the facts and reject these unfair and unwarranted tax proposals. Thank you.