It's been a week since we all learned about General Electric's innovation in the corporate tax realm.
The company's vice president for communications and public affairs, Gary Sheffer, responded to the New York Times' story breaking the GE's tax saving situation via a letter in today's newspaper:
"It was significant losses at GE Capital in the financial crisis, not 'tax avoidance' strategies, that reduced General Electric's 2010 overall tax rate below historic levels.
Without these financial crisis losses at GE Capital, G.E.'s tax rate would have been near the average of other multinational corporations. Our tax rate will return to more normal levels this year as GE Capital recovers from the financial crisis. In short, when you lose money, you don't pay taxes, and that's what happened at GE Capital.
The Times points out that G.E.'s job numbers in the United States are down over the past decade, but does not provide the context: G.E.’s employment in the United States has increased in this period, apart from the sale of businesses. Those jobs weren't eliminated; they moved to other companies."
While the GE tax situation has highlighted the corporate tax reform debate, the company is not alone in finding ways to reduce, or eliminate, tax liabilities.
The Daily Beast has put together a gallery of 15 major corporate tax dodgers. The website focused on the largest American companies, as well as ones it says are "are notorious in accounting circles for consistency in doing whatever they can to minimize their U.S. tax liability."
They are, alphabetically: Altria (formerly Philip Morris), Boeing, Devon Energy, General Electric, Goodrich, Google, Hartford, Hewlett-Packard, IBM, Microsoft, Morgan Stanley, News Corp, Oracle, Pfizer and Time Warner.
Again, no one is accusing these companies of tax illegalities. Their tax experts are simply taking full advantage of the Internal Revenue Code.
The firms utilized not only popular foreign tax havens, but also implemented strategies over the years that involved transfer pricing, depreciation, earnings repatriation and, more recently, Troubled Asset Relief Program (TARP) funds.
I liken the corporate tax game to another global sport, auto racing. Each major motorsports series has a set of rules, but there are many gray areas in the guidelines. The teams that figure out how to best exploit those fuzzy parameters are usually the ones that end up in victory lane.
And when it comes to taxes, the tax crew chiefs who know the tax code and where it can be pushed are the ones who lead their corporate teams to the tax winners' podium.
- Corporate taxes: time to cut the tax rate
or to make sure companies pay at all?
- Debt panel suggests major tax changes
- Deficit commission tax overhaul, take 2
- Up next for Obama: Tax system overhaul
- OMG! AIG ... WTF?!?
- Sing along to the TARP song
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