I HAVE SPENT SEVERASL WEEKS ON TRYHING TO DISCOVER G E MAGIC FORMULA OF NOT PAYING INCOIME TAX ON BILLIONS OF DOLLARS OF EARNINGS. G E IS AN INTERNATIONAL CORPORATION AND AS SUCH BENIFITS FROM STIPULATIONS IN INTERNATIONAL TRADE AGREEMENT AND TAX TREATIES.
THEY USE A COMPLEX MIXTURE OF CREASTIVE ACCOUNTING AND TAX CREDITS WHICH NREDUCE THEIR DOMESTICE TAX LIABILITIES TO ZERO.
I HAVE ATTEMPTED HERE TO PROVIDE A SIMPLIFIED EXPLANATION OF WHAT I BELIEVE THEY ARE DOING. THE BIGGEST BENIFIT IN TQAX CREDITS IS IN THE FORIEGN TAX CREDIT WHICH MEANS THAT TAXES PAID TO A FOREIEGN ARE DIRECTLY CREDITED TO THEIR U S INCOME TAX.
G E HAS MANUFACTURING AND SALES OPERATIONS IN SEVERAL COUNTRIES AND THEY BOTH EXPORT GOODS PRODUCED IN THE U S AND IMPORT GOODS MANUFACTURED IN FORIEGN COUNTRIES.
WHILE CORPORATE INCOME TAX RATES FOR THE U S IS 35% OTHER COUNTRIES INCOME TAX RATES RANGE FROM 5% TO 22%.
THE IMPORTING AND EXPORTING OPERASTIONS GIVE G E SEVERAL OPPORTUNITIES FOR CREATIVE ACCOUNTING PRACTICES. FOR EXAMPLE G E CAN MANUFACTURE GOODS IN THE U S AND REPORT THE COST OF THAT MASNUFACTURE ON THE U S INCOME TAX RETURN. THEN EXPORT TO A COUNTRY WITH A MUCH LOWER TAX RATE AND ASSIGN THAT INCOME TO THER OTHER COUNTRY WITH THE LOWER TAX RATE. THIS PRACTICE RESULTS IN LOWERING THE NET TAXABLE INCOME IN THE U S AND INCREASES THE NET TAXABLE INCOME IN THE OTHER COUNTRY.
LETS SAY G E EXPORTS GOODS WITH A COST OF 100,000 DOLLARS WHICH COST WOULD REPRESENT A TAX SAVING OF 35,000 IN U S TAXES. LETS ASSUME THAT THOSE GOODS WOULD SELL FOR 75,000 IN A COUNTRY WITH A 10% TAX RATE WHICH WOULD CREATE A TAX OF 7500 A TAX BENIFIT OF 27,500, ADD TO THAT THE 7500 TAX CREDIT APPLIE TO THE US TAX LIABILITY AND WE GET A TOTAL TAX BENIFIT OF 35,000, WHAT SMART BUSINESS MAN WOULD BE ABLE TO RESIST SUCH A SAVINGS.
THIS FORIEGN TAX CREDIT IS A REAL BOON TO NET PROFITS, JUST MULTIPLY THESE FIGURES TO THE BILLION DOLLAR LEVEL THAT G E OPERTATES WITH.
AS I SAID THIS IS AN OVERSIMPLIFYED EXAMPLE BECAUSE WHEN OTHER BENIFITS OF TRADE AGREEEMENTS AND TAX TREATIES ARE FACTORED IN, IT IS ANY WONDER THAT G E CAN ACHIEVE SUCH GIGANTIC PROFITS WITHOUT PAYING ANY RELEVANT INCOME TAX ?
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Red State Blog had a great piece last January on this. I'll quote one part of it:
In 2001, the year Immelt became CEO, GE had 158,000 US employees. In 2009, GE employed just 134,000 Americans. Under Obama’s guy Immelt, GE has shed 24,000 American workers, or 15% of its US workforce.
Abroad it’s a different story. In 2001, GE employed 152,000 workers abroad. In 2009, that number had edged up to 154,000. GE’s non-US workforce now exceeds its American workers.
Add this trend to the huge receipt of Federal funds for medical records being required to go on line, the requirement for those bogus new lightbulbs (all G.E. but made in China), and don't forget the new requirements for "energy save" appliances being mandated in homes now. All are Obama regulations to pad the pockets of G.E.
LOBBYIST'S OF THE TAX CODE, AND MONEY TO THE DEMOCRATS CAMPAIGN FUND.UN- AMERICAN
TO SEND JOBS TO CHINA IN THE END ~