Fortune’s senior editor-at-large Allan Sloan points out how the New York Times has changed its position on GE and taxes.
We would also like to clarify a few things that have been written and said recently about GE’s effective tax rate.
Claim: GE paid no taxes in 2010.
Fact: GE did pay almost $2.7 billion in cash income taxes in 2010 on a consolidated basis (almost 19% of pretax income from continuing operations) globally, including significant U.S. federal income tax payments. GE also paid in excess of $1 billion in payroll, state and local sales and use and property taxes.
Claim: GE “dodges” tax obligations generally.
Fact: Over the past 10 years, GE has paid almost $23 billion of corporate income taxes to governments around the world, making it one of the highest payers of corporate income taxes. Over the past five years alone, GE has paid over $14 billion of income taxes.
Claim: GE used “tax avoidance strategies” to reduce its tax rate the past few years.
Fact: GE’s tax rate has been lower in recent years due to financial crisis losses at GE Capital. From 2008-2010, GE Capital suffered nearly $32 billion in losses as a result of the financial crisis. That’s not a “tax avoidance strategy.” Absent such unusual losses, GE’s overall effective tax rate would have been 15 percent over the past several years, which is comparable to the average for other multinational corporations. Our 2011 tax rate is slated to return to more normal levels with GE Capital’s recovery.
Claim: GE received a $3.2 billion refund or rebate on its 2010 taxes (alternately described as GE “made” $3.2 billion or U.S. taxpayers “paid” GE $3.2 billion).
Fact: This is not true. GE received no rebate or refund or payment from the government on its 2010 taxes.
The tax benefit it received is a book accounting concept and resulted from reversal of accruals for prior year taxes as a result of audit settlements with the IRS and revisions of estimates for prior-year returns. So this benefit is an accounting concept related to prior years, not a refund of taxes from the IRS for 2010. In addition, much of this benefit is offset by higher future tax liabilities over time — accounted for as deferred tax liabilities as reflected in our financial statements
Claim: GE has dramatically reduced U.S. employment over the past decade.
Fact: GE’s US employment has increased from 2001 to 2010, excluding dispositions. Those jobs weren’t cut; they moved to other companies.
Claim: GE and other U.S. companies use overseas tax “shelters” to avoid paying their fair share of U.S. taxes.
Fact: The United States is virtually the only major industrialized country that taxes overseas earnings of companies. GE and many other companies — and, for that matter, Congress and administrations over many decades — have supported deferral of tax on foreign earnings for all companies. Doing so makes U.S. companies more competitive globally. This is not a “shelter,” it is good policy. (Learn more in this presentation from the Business Roundtable and in other information provided by the Roundtable.)
Claim: GE used charitable contributions to “horse trade” for legislative relief on taxes.
Fact: This is completely false. A recent New York Times story pointed to a 2008 donation to New York City schools. The GE Foundation independently determines public-education-related donations. Like other public education Foundation donations to cities in which GE is located, this grant was based on the percentage of students who receive free or subsidized lunches. In fact, as GE told the Times (although the Times failed to report it), former U.S. Rep. Charles Rangel introduced legislation after the GE Foundation’s donation was announced that was directly contrary to GE’s position and which GE opposed. This was the sixth grant under GE’s $150 million+ Developing Futures in Education program in major GE cities, including Louisville, KY; Cincinnati, OH; Stamford, CT; Erie, PA; Atlanta, GA; New York City; and recently, Milwaukee, WI.
* See what one securities analyst has to say about GE taxes
* See our previous response to The New York Times story about GE and Taxes
