By Andrew Nusca
Posting in Technology
GE paid no taxes to the IRS in 2010, thanks to imaginative accounting and aggressive lobbying for breaks on green technologies.
General Electric paid absolutely no taxes to the U.S. Internal Revenue Service in 2010, thanks to a strategy of imaginative accounting and aggressive lobbying for tax breaks, according to a new report.
The New York Times' David Kocieniewski reports, perhaps damningly, that the multinational conglomerate is among the most skilled at reducing its tax burden, despite America's 35 percent corporate tax rate, among the highest in the world.
Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines. But the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.
Company officials say that these measures are necessary for G.E. to compete against global rivals and that they are acting as responsible citizens.
Of course, GE sells everything from light bulbs to refrigerators to industrial equipment to medical devices to jet engines to, of course, nuclear power plants -- including the problematic Fukushima Daiichi reactor in Japan.
In January, we reported on a fireside chat with chief executive Jeff Immelt, Xerox CEO Ursula Burns and Cisco CEO John Chambers, who among other topics discussed protectionism and immigration and how policy affects their ability to do business.
Part of that conversation:
Unfortunately, current tax policy discourages U.S. corporations from hiring Americans, [Burns] said.
“The cost burden of having an employee in the United States is actually [comparatively] very high,” she said.
“We’re one of five countries in the world that has an arcane tax policy that taxes income twice,” he said. “We pay taxes in India and China and Europe, and if we bring it back, we have to pay taxes again.”
“You’re in essence spending 70 cents on the dollar. Nobody in their right mind would do that.”
Business only goes where the market is, Chambers said.
“I have 40 billion dollars here [in the U.S.]. I have 40 billion dollars allocation overseas. I’m going to spend that money,” he said.
Immelt said he doesn’t understand what good it’s doing the U.S. to have a trillion dollars outside its borders.
“Jobs go where the markets are,” he said. “I never apologize putting a factory in China if my growth is in China.”
Now, that conversation seems to appear in a different light. The obvious question: how can these corporations survive if the corporate tax rate is so prohibitively high?
Or, to put it in Chambers' words: who in their right mind would do that?
After this Times report, it appears that the reality is more complicated. The question that's nagging me: what would GE's U.S. operations look like if they really paid taxes, without all the legal acrobatics?
Update: GE's public affairs team has published a document refuting the Times report's claims.
Mar 25, 2011
It is a vicious cycle that crosses many industries and both parties. They bankroll candidates across the country in both parties by pumping money into PACs. Usually they back the already owned incumbent, but they have no problem funding both candidates just to have their bases covered in a tight race. Once elected those bought people feed tax breaks and government contracts back to the company. With profits in hand, the money merry-go-round spins again the next election cycle. With some of their recent actions in mind, the White House lawn should have a sign on it that says wholly owned subsidiary of GE.
It is not tax evasion when they are using a legal loophole put there because of corruption, indifference or stupidity.