A week or two ago, the NY Time’s dropped a bombshell of a story.
The headline, “GE’s Strategies Let It Avoid Taxes Altogether”:
The reported “facts”: GE reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States. Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
Hmmm.
According to Reuters, it turns out that GE hasn’t actually filed its tax return for 2010 yet, and when it does it will pay some unknown amount in US income taxes.
The ultimate conclusion is likely to be the same, but it looks like the Times got some of facts wrong.
Oh my.
The Homa Files 
April 5, 2011 at 6:38 pm |
Indeed, it looks like the NYT journalist is confusing what GE reported on the financial statement with what GE will actually file with the IRS.
“GE, like other publicly traded companies, publicly reports one set of tax numbers to calculate its earnings but uses a different set, which remain confidential, to calculate what it owes the tax collector.”
Nonetheless, I’d prefer to invest in a company that boosts its reported earnings not by modifying and toying with its tax activities, but by more natural business measures such as revenue growth and cost cutting.
“Many U.S. multinational corporations keep some profits abroad, none more than GE: Its total was $94 billion at the end of last year. As long as corporations tell their accountants they intend to indefinitely invest those profits outside the U.S., they don’t have to make a provision for federal and state taxes on them. If the profits stay abroad, they remain untaxed.
“GE, in 2008 and 2009, told its accountants that about $3 billion of overseas profits were going to be indefinitely invested abroad. Previously, the company had not made that investment decision, so it was required to set aside a bookkeeping provision of about $1 billion for U.S. taxes. That provision impacted publicly reported earnings when it was taken.
“GE never actually paid the $1 billion in taxes. And it doesn’t say when the previous accounting provision of $1 billion was taken. But, lo and behold, in 2008 and 2009, when the company sorely needed higher profits, there they were, thanks to a tax benefit! It didn’t have to sell more jet engines, or turbines, or kitchen appliances.”
http://www.propublica.org/article/5-ways-ge-plays-the-tax-game