Chevron's Whopping Tax Burden

Last year, big oil was blamed for enormous profits while dodging their fair share of taxes. Unfortunatedly, with the decline in the price of oil, there is no windfall this year.

But pundits and politicos missed the real story of oil's overtaxation. To set the record straight, Chevron (CVX) made out a check for $1.3 billion in income taxes this quarter. Add in the $4.0 billion paid out in assorted other taxes (VAT, excise, "other taxes") and you get a eye-popping $5.3 billion given out to various government entities. That's an incredible 74% of its income before all tax expenses.

So, for the quarter, $1.8 billion for shareholders and $5.3 billion for government. Doesn't seem fair, does it? That's not any different from previous periods. For the full 2008 year, CVX paid out $19 billion in income taxes and $21 billion in "other taxes" leaving a net profit of $24 billion, a clobbering 63% in taxes.

Comments

[Jasper M:]

Wow! Much is made these day about nationalized businesses, but with that kind of payout, seems to me that chevron is effectively heavily nationalized already.

May 08 03:26 PM

[Alan Young:]

Cost of doing business. How much do taxpayers spend on military operations that protect Chevron's overseas operations?

May 08 03:46 PM

[THofler:]

Yeah, the cost of doing business is that while I would prefer to invest in Chevron, I'm actually invested in Eni and Total. Unbelievably, the French and Italians respect investors better than the US.

I expect both California & the Feds will increase the tax rates on Chevron even more, while Total's might decline a bit under Sarcozy.

May 08 10:29 PM

[Alan von Al...:]

On May 08 03:46 PM Alan Young wrote:
> How much do taxpayers spend on military operations
> that protect Chevron's overseas operations?

Zero in Kazakhstan, zero in Angola, zero in Nigeria, zero in the North Sea, zero in Australia, zero in Thailand and zero in Latin America.

May 09 08:32 AM

[Ferdinand E...:]

I'm a fan of Big Oil, but I see no reason to cry when they have to pay a few billion in taxes. They do pretty well for themselves, regardless of the oil price. I've also encountered a few of their 'soldiers' at conferences, but I can't recall a single one of them giving a talk worth remembering.

May 09 09:54 AM

[Gregman2:]

"That's an incredible 74% of its income before all tax expenses." It'd be interesting to know precisely what all those other tax expenses are.

May 09 11:27 AM

[searcher:]

Yes, the oil and gas exploration and production corporations certainly are freeloading on military support provided by the people and serve no useful purpose other than to line the pockets of capitalists. After all, industry and our personal lives could just as easily run on policies and platitudes. Surely, if we just drilled on the sites of current and former retail petroleum outlets we'd have energy to spare.

May 09 11:52 AM

[SeekingTruth:]

Im not an accountant, which I consider mostly a black art (I try anyway), - but one thing I do know, and that is that one is not going to explain a Corp.'s tax and earnings situation in three short paragraphs, esp. an Oil Corp.

Best to treat this complex subject thourougly or not at all.

May 09 12:35 PM

[Stephen Ros...:]

Thank you for your comments. For those looking for more information:
1. Income Taxes


Year ended December 31
2008 2007 2006

Taxes on income

U.S. Federal

Current
$ 2,879 $ 1,446 $ 2,828
Deferred
274 225 200
State and local
669 338 581

Total United States
3,822 2,009 3,609

International

Current
15,021 11,416 11,030
Deferred
183 54 199

Total International
15,204 11,470 11,229

Total taxes on income
$ 19,026 $ 13,479 $ 14,838

2. Taxes Other Than on Income


Year ended December 31
2008 2007 2006

United States

Excise and similar taxes on products and merchandise
$ 4,748 $ 4,992 $ 4,831
Import duties and other levies
1 12 32
Property and other miscellaneous taxes
588 491 475
Payroll taxes
204 185 155
Taxes on production
431 288 360

Total United States
5,972 5,968 5,853

International

Excise and similar taxes on products and merchandise
5,098 5,129 4,720
Import duties and other levies
8,368 10,404 9,618
Property and other miscellaneous taxes
1,557 528 491
Payroll taxes
106 89 75
Taxes on production
202 148 126

Total International
15,331 16,298 15,030

Total taxes other than on income
$ 21,303 $ 22,266 $ 20,883

May 09 01:32 PM

[CaptainJJack:]

This is not unusual for a resource company, and similar things happen in other industries.

For example, the insurance industry typically pays 2% premium tax, and in many cases, such as health insurance, this amounts to a HUGE tax rate as a percentage of their margins, and as a percentage of their net income.

I would not spend a lot of time fretting over Chevron's tax bill. I am pretty sure they don't.

May 09 08:51 PM

[whisperonth...:]

To the whiners who still think that it's not enough taxes for the "big oil companies" to pay, perhaps you should put your money where your mouth is, i.e., in oil investments. That might get you a little of those "profits" too. They were enough to pay ALL my utility expenses and gasoline expenses last year plus pay off my car, and I am by no means a huge investor. The same would be true this year too. And by sometime in the near future, I expect these investments to pay equal to what social security might give me when I retire. (And if the financials and REITs finally come back up, I can double that.)

Then, when you finally get some of that cash flowing your way, we'll see how much more you want them to be taxed.

May 09 11:53 PM

[beenburnedt...:]

Will CVX be making a corporate move to Houston in the next 5 years?

Anybody who thinks they're not paying their fair share is a moron.

May 11 01:22 AM

[franke:]

Business is merely a conduit for paying income taxes. Each consumer pays the business income tax as part of the purchase price. In my opinion it is time to abolish, not merely reduce, the income tax on business.

May 26 08:51 AM

[MarkitWacha:]

You should consider moving out of equity investments in favor of oil futures or managed futures funds. If you want to gain from oil's rise, you don't necessarily have to take the risk of the oil company succeeding in the future.


On May 09 11:53 PM whisperonthewind wrote:

> To the whiners who still think that it's not enough taxes for the
> "big oil companies" to pay, perhaps you should put your money where
> your mouth is, i.e., in oil investments. That might get you a little
> of those "profits" too. They were enough to pay ALL my utility expenses
> and gasoline expenses last year plus pay off my car, and I am by
> no means a huge investor. The same would be true this year too.
> And by sometime in the near future, I expect these investments to
> pay equal to what social security might give me when I retire. (And
> if the financials and REITs finally come back up, I can double that.)
>
>
> Then, when you finally get some of that cash flowing your way, we'll
> see how much more you want them to be taxed.

May 26 10:13 AM