I suppose our lawmakers who write the tax codes do the right thing for favoring businesses with write-offs, but, really now, is it “right” for BP to deduct the entire cost of its oil blowout expenses that will cost taxpayers about $10 billion in lost revenue.
News accounts from London say BP took a pretax provision of $32.2 billion for capping, clean up and damage claims payments leaving a $10 billion credit U.S. taxpayers to eat.
By law, BP can also deduct all the billions of dollars in fines eventually assessed against it for violating various government agency pollution standards although that assertion is disputed.
BP spokesman Toby Odone told msnbc.com:
“This is just normal practice. If you declare an income, you have to pay tax on it — it’s the way tax laws are set up. We will pay less in tax because we are earning less, as you would as an individual if you were earning less.
“This is the accounting process,” he added. “We are going by U.S. laws, we’re following the accounting laws of the country. We are a business and we have shareholders we are responsible to.”
Uh huh. There is no moral clause for stupidity and malfeasance in the tax codes. The courts in pending litigation will determine that separately.
I was outraged in an earlier post that BP cut costs in design and installation of the well during leasing operations on the Deepwater Horizons drilling platform because the project was behind schedule. Turns out 75% of its leasing costs were a tax write off.
Congress does have a precedent working in its favor.
In 2006, Boeing decided to skip a tax deduction for any of a $615 million settlement with the government over ethics charges, under pressure from lawmakers.
BPs Odone promised not to worry, the Boeing case was different. He claimed BP is not allowed to offset taxes against any fines or settlements with the government over the spill. My guess that was part of the $20 billion trust fund for claims negotiated by the Obama administration.
Don’t hold your breath over that one.
And this gem:
Oil analyst Dougie Youngson, of London-based Arbuthnot Securities, also told msnbc.com that BP’s decision to offset the spill costs was normal procedure.
Asked about those who might feel BP has a moral duty to bear the costs of the spill without offsetting the losses, Youngson said: “If they want to change the rules of accountancy for one instance … it’s just a fact they are going to have to cope with.
“If you make a loss, you don’t pay tax,” he said. “I don’t think morals come into it. I cannot remember any accountant being moral.”
Need I remind you that after the Exxon Valdez oil tanker grounding, Congress set a maximum $75 million for damages on future oil spills. That was 1990. In 2010 Congress is struggling to increase that liability to $10 billion over the dead bodies of opponents.
Nor do I waste my breath reminding us that the BP blowout is the worst environmental disaster in our nation’s history that has left 11 oil riggers dead, a distressed fisherman committing suicide and plunging the economic backbone of the Gulf states deeper into the jaws of the recession. Not to mention the tar killing our wildlife and a fragile ecological system.
One half of BP shareholders are Americans. You invest at your own risk. Don’t worry. Uncle Sam has your back.
A driving principle in the tax codes is to encourage investments. There should be a moral clause rider. The best I can ascertain in the BP blowout is just enough stupidity, carelessness, bad luck and greed with no contingency plan in case it blew up in their face.
Don’t worry, BP. Uncle Sam has your back.
Cross posted on The Remmers Report
Comments are welcome. Link to my blogsite or go to my email address at [email protected] . Remmers’ varied career spans 26 years in the newspaper business. Read a more thorough resume on The Remmers Report.
Jerry Remmers worked 26 years in the newspaper business. His last 23 years was with the Evening Tribune in San Diego where assignments included reporter, assistant city editor, county and politics editor.