Tax Analysts Blog

Mr. Immelt's $84 Billion

Posted on Jan 24, 2011

GE is one of the biggest beneficiaries of the current corporate tax system. If the President's pick to lead his new Council on Jobs and Competitiveness, GE CEO Jeffrey Immelt, gets his way his company will benefit even more. GE is renowned for having one of the most sophisticated tax departments in the country. The numbers from GE's annual reports show the staff is living up to its reputation.

Fact: #1 GE's effective tax rate reported to shareholders has dropped precipitously from the 30s in the 1990s to extremely low levels.
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Fact #2: The decline in GE's effective tax rate has little to do with domestic tax breaks but is almost entirely due to low-tax foreign profits.

Fact #3: More and more of GE's business and employment is outside of the United State. Still, profits booked outside of the United States have grown even faster, suggesting GE is taking advantage of lax U.S. transfer pricing rules that make it easy to shift profits into tax havens.

Fact: #4. The rapid increase in profits booked abroad has resulted in a massive accumulation of earnings "permanently invested" outside the United States.



Like the CEOs of most U.S. multinationals, Jeffrey Immelt wants the option of repatriating GE's accumulated $84 billion under the provisions of a temporary tax "holiday" where U.S. tax would only be 5.75 percent instead of the full 35 percent corporate tax rate. Immelt and his CEO brethren argue this will create jobs although evidence from the prior holiday (enacted in 2004) does not support this. Citizens have a right to be concerned the president's new advisor will give priority to promoting the competitiveness of U.S. multinationals rather than the competitiveness of the overall U.S. economy. And why shouldn't he? He has a fiduciary responsibility to his shareholders to do exactly that.

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