Group Project: Corporate tax avoidance and
reputational damage
ExxonMobil
1
1. What is the nature of the company’s business? Are there other companies in the same industry that have
been in the news for similar reasons? (8 marks)
ExxonMobil is an American oil and gas company. Its headquarters are located in Irving, a suburb of Dallas,
Texas. ExxonMobil is among the top 10 companies in the world in terms of market capitalization. This
company owns 45 refineries located in 25 different countries. These refineries produce 6.3 million barrels
of oil per day. The company also owns 42,000 service stations in over 100 countries under the Exxon, Esso
and Mobil brands. ExxonMobil also produces petrochemicals.
Chevron, Shell, BP, Rio Tinto or Glencore are other oil companies that pay very little tax. Chevron, for
example, has 62% of its subsidiaries in tax havens. The figures are almost the same for all big companies
in this sector and have been in the news for tax evasion.
2. What are the primary tax mechanisms that this company has been using to avoid taxes? (10 marks)
Nearly a third of ExxonMobil’s overseas subsidiaries are registered in tax haven countries, like the
Netherlands, Luxembourg, Ireland, and Bermuda, where there is little or no tax on corporate profits and
enable them to evade tax obligations in an environment where they operate legally. It’s difficult to determine
how much income is being siphoned off to tax havens by ExxonMobil, but there is no doubt the sums are
enormous. For example, we find that ExxonMobil paid $15 billion in taxes to other governments in 2009,
but not a penny of those taxes went to the U.S. Treasury.
ExxonMobil actively seeks state tax subsidies. ExxonMobil’s effective tax rate is around 10%, while the
official corporate tax rate is 35%. Subsidies are one reason why ExxonMobil pays less than half of
America’s official corporate income tax (35%). In the case of Louisiana, where ExxonMobil operates
refineries and chemical plants, the company received $136 million in property tax breaks in 2011. The state
issued more than $500 million in tax-free bonds on ExxonMobil’s behalf.
ExxonMobil used a loophole that allows companies to deduct their malfeasance costs as ordinary business
costs. In 1989, the Exxon Valdez tanker spilled 11 million gallons of crude oil into Alaska’s Prince William
Sound. It was an artificial disaster. Until 2010, it was the worst oil spill in U.S. history. After two decades
of court delays, Exxon paid $1.1 billion in 2011 and only $524 million after taxes. That means taxpayers
paid half of Exxon’s fine.
ExxonMobil has spent a huge amount of money lobbying Congress over the past decade, in order to get
favorable tax and regulatory treatment. And taxes have been topped on ExxonMobil’s lobbying issues. The
company lobbied on 112 tax bills between 2007 and 2009.
ExxonMobil’s current CEO, Darren Woods, is a member of the Business Roundtable. And the previous
CEOs were also a member of the organization. The Business Roundtable (BRT) is a non-profit organization
whose members are chief executives of major American companies. The Business Roundtable has extended
tax cuts and successfully lobbied for big cuts in corporate taxes on fiscal policy. It also allowed ExxonMobil
to pay less tax.
3. How did these tax practices come to the notice of the tax authorities? (10 marks)
As the Australian Taxation Office (ATO) began requiring big companies to disclose their tax payments,
ExxonMobil has been dogged by allegations over its tax affairs in Australia due to the fact that they haven’t
paid any corporate tax since 2013. Even more dramatically, they won’t pay taxes until 2021. ExxonMobil
said they had no taxable income as a result of heavy capital investment spending. They also stated, “We are
