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Oil and Gas Giants Receive Unneeded Subsidies, Avoid Paying Taxes


Oil-money-dollar-pile-350Shocking report by the nonpartisan research and advocacy group Citizens for Tax Justice (CTJ), reveals that for the past 5 years major oil and gas companies received more subsidies from the government than they paid as a corporate income tax on their huge income.

By presenting the results of their analysis of 500 major enterprises, the agency hopes to open the eyes of those governmental officials, who still think that it is a good idea to give extra, and quite frankly, unnecessary subsidies taken from us, the honest tax payers.

According to the statistics, for the period between 2008 and 2012, some of the world’s most profitable enterprises in the oil and gas industry managed to take advantage of every possibility and not pay the taxes that they are supposed to. What is more, some actually noted a negative tax balance, which in other words means that they received more subsidy from the government and money from the tax payers than they paid back despite their huge income.

By law, every company that makes profit has to pay 35% corporate income tax. Naturally, we would assume that giants such as Big Oil, Murphy Oil, Exxon Mobil, Occidental Petroleum, among others, would be proud to pay their fair share, but it is not at all the case. The industry paid around $32 million worth of taxes for the examined period. If they paid what they were supposed to, then this number should have been 59.9 billion, or $62.4 billion more than what they actually paid. Here we should also point out that the companies received a total of $45 billion, and noted a profit of the incredible $223 billion.

It is very sad to see, how while at the end of 2011 the ethanol producing industry willingly gave up their tax credit, the companies that made billions found ways to trick everyone and take every cent they could from the government and the tax payers. Let’s hope that by putting the numbers black on white, CTJ manages to show that these industry giants are only exploiting the system and definitely using the subsidies to only benefit themselves, and not the economy, as they claim.

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  1. What you call “subsidies” are actually capital recovery allowances, like depreciation, depletion and amortization. All businesses get them.Capital intensive business like energy invest more capital per dollar of sales, so they deserve more capital recovery allowances.

    Capital recovery allowances are not subsidies. Subsidies are paid in cash, often before any product or service is produced. The subsidized business does not have to make a profit in order to relieve a subsidy. Most subsidized businesses, like renewable energy, are losers and never produce any useful product or service.

    In order to receive capital recovery allowances, a business must make a capital investment. Businesses should be able to recover the amount of their invested capital free of tax. How would you like to pay tax on the principal of a savings account? Deposit $1,000, earn $60 in interest, but owe 35% tax on your original deposit. You would have deposited $1,000, but only receive $1000 + $60 – $350 = $710. Nobody would do it.

    But they are vary unfair in a key respect. Businesses should be able to deduct all their investments from taxable earnings in the period in which the funds are invested. But no, governments only let businesses take these deductions in a trickle.

    So here’s a proposal: allow all businesses to deduct all investments from taxable income during the period in which they are made. If you don’tlike that, then just change the tax law to end the practice of capital recovery allowances for ALL businesses. See what THAT does to employment and the availability of goods & services.



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