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10-Apr-08 10:15 [Americas]
Obscure tax rule increases employee benefits of US CEOs Many chief executive officers of major firms in the US are paid a base salary of $1 million (£500,000) a year, not including employee benefits, due to an obscure tax rule in the country.
Known as section 162(m) the rules is designed to punish firms which pay their top employees over $1 million, by taxing them heavily if they do, reports USA Today.
Ross Zimmerman, compensation consultant at Exequity, said: "Most boards view the $1 million deductibility as not a huge item. It's a low-lying issue on the radar."
However the tax rule may have boosted executives' pay because it only penalises the base pay and huge employee benefits are then given to the top men at companies.
Chief executive officers are paid massive extra amounts in bonuses and options and companies can then deduct it as a pre-tax expense.
Exequity was established in 2006 by Mr Zimmerman and Mike Sorensen and it offers executive compensation assistance.
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