A Fortune article written by Andrew Belnap and Jeff Hoopes discusses the topic of corporations with low effective tax rates, and how it is unproductive to shame them. Belnap is an assistant professor of accounting at McCombs, and Hoopes is an associate professor of accounting and research director of tax at UNC. There is a quick summary of the article below. Click here for the full article.

There are some big profitable corporations that pay no tax, and some of those companies share their profits with the government. In 2017, Congress lowered the statutory corporate tax rate to 21%. Companies such as VF Corp and Western Digital had higher effective tax rates, and gave money to the government. Effective tax rate is complex; it’s tons of transactions filtered through a tac code and financial accounting rules. Calls for new tax rules are not serious tax policy material.

Using Advanced Micro Devices as an example, the tax system allows companies to offset current income with past losses which could explain the low tax rates it pays. It does not necessarily indicate tax avoidance, and rather represents net operating losses. Differences in company effective tax rates often have a straightforward explanation that rarely deal with tax evasion or aggressive tax avoidance.

The tax system could be amended, and the IRS is stretched thin. Political power plays a big role in the tax policies in place. Although there are companies that do avoid taxes, it is important to gather the evidence before berating a company for low rates or praising companies with high tax rates.