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State to Study Impact of Corporate Tax Avoidance

Is Virginia getting all the tax dollars coming to it? Michael Pope reports on an effort to crack down on tax avoiding corporations. 

In recent years, concerns have been growing that corporations are finding new and creative ways to avoid paying taxes.

Chris Wodicka at the Commonwealth Institute says Virginia allows too many big businesses to dodge paying their fair share.  "Corporations have become much more sophisticated in how they strategize around reducing their state taxes by being able to move profits between different states and subsidiaries." The solution, he says, is combining the reporting of parent companies with their subsidiaries and related companies.

But Jared Walczak at the Tax Foundation says that combined reporting approach might end up being overly complicated and ultimately counterproductive.  "You may be adding a subsidiary or an affiliated company in another state that has no sales in Virginia. That actually reduces the amount you can tax the in-state company. So it's not always a pro. There are ways in which this can actually lose revenue."

Lawmakers recently approved a study to look at how mandatory combined reporting might work in Virginia, and what kind of lost revenue might be captured by going after tax-avoiding corporations.

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.

Michael Pope is an author and journalist who lives in Old Town Alexandria.