So did American taxpayers give the likes of Goldman Sachs billions of capital, only to find out that the former investment banking giant is paying hardly any tax? The headlines were all about Goldman Sachs’ first ever quarterly loss since listing on the New York Stock Exchange back in 1999, and a a smaller annual profit for the year. The 4th quarter result was indeed rotten: a loss of $US2.12 billion. It was well guided by analysts, with full year earnings of $US2.32 billion. That was down 80% from the $US11.6 billion in 2007. Revenues for the year dropped 52% to $US22.2 billion. The $US2.3 billion profit, after paying $10.9 billion in employee compensation and benefits was down 46% from the 2007 figure. But buried in the statement was an amazing admission. The bank that got $US10 billion in fresh capital and debt guarantees from the US government in October, and was allowed to become a commercial bank to use the strength of the Fed to protect it. It paid tax in the 2008 year at an effective 1%, or just $US14 million worldwide. That compares with a tax bill for 2007 of $US6 billion. The profit statement explained the ridiculous tax bill thusly: “The effective income tax rate was approximately 1% for 2008, down from the 25.4% for the first 9 months of the year and 34.1% for fiscal year 2.007. The decreases in the effective income tax rates were primarily due to an increase of permanent benefits as a percentage of lower earnings and changes in geographic earnings mix.” In other words, tax deductions already in the books had a larger impact than in the past because earnings were lower in 2008 and in the final quarter. But there was also the quaint phrase “geographic earnings mix”. That’s spin for a big rise in the use of tax havens to lower taxable income around the world. So as the pressure on earnings worsened, especially in the fourth quarter, so did more and more of the trading income of the company. That income became due in the final days of the year and was taken in low tax havens like Ireland (12.5%), Hong Kong, and probably some nice places around sunny tropical oceans.