Citigroup Boosts Its Tax Liability . . . to Cut Its Tax Liability
In a world where most companies do all they can to avoid taxes, it is odd to hear Citgroup wants to incur more taxes here in the United States.
Citigroup recently bought $7 billion in credit card loans made to Best Buy customers from Capital One, along with all the taxes associated with them. The group also reclassified its foreign spending to bring the money back into the United States, making it subject to U.S. taxes.
Why the change of heart? It wasn't to stimulate the economy. These moves enable Citigroup to take advantage of special tax deductions and credits for which it was previously ineligible. The total deductions could be as much as $55 billion. The bank estimates it will need to earn $112 billion to use all of its deferred tax assets.
"We are focused on executing our strategy, and any allocation of resources must be in line with that strategy. If those actions also result in aiding the use of our [deferred tax assets], then that is an added benefit," said Citigroup spokesman Mark Costiglio.
Essentially, Citigroup is making the current system work to its advantage, and it is doing so in an unconventional way. Although some critics suggest Citi will have to write down some of its assets after all of this is completed, many agree their plan is brilliant.
—John Oldshue, LowCards.com