The New York Times reported on Friday:
General Electric, the nation’s largest corporation, had a very good year in 2010.
The company 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.
How does it do that? Legally, of course, but as the NYT notes, no one lobbies for more tax breaks than GE. And it gets them.
Not in the US only either.
Which company does more than most in Europe to oppose country-by-country reporting? Why, that's GE Capital. It's done by Will Morris, its full time head of European tax lobbying. I know that's not the title on his CV, but that's what he does.
How does he do it? Well, he's on the OECD working group that is currently reviewing country-by-country reporting and doing his best to oppose it.
That's not hard for him to do. He's head of the CBI tax committee for one thing. That adds a lot of lobbying power.
And he's also Chair of the European Tax Policy Forum, which is described as "a registered UK charity that sponsors independent academic research into business tax issues". Odd then that so much of the work seems to be done at my friends at the Oxford Centre for the Non-Taxation of Business.
Odd to, coming back to the OECD review of country-by-country reporting that by some strange coincidence that the job of reviewing whether country-by-country reporting might be of benefit was given to those same friends at that same Oxford centre, who have so determinedly set out with clear political intent to undermine all civil society demands for reform of accounting and transparency on tax. The latest report from the review group (published on Wednesday and which fell into my hands half an hour ago) correctly noted
The civil society campaign for some form of public disclosure of country-by-country financial information by multinational enterprises (MNEs) can be traced back almost ten years. A 2003 publication by Richard Murphy and the Association for Accountancy and Business Affairs, which had as its focus holding companies to account for their corporate social responsibility and tax payments to the countries in which they operate, proposed that the International Accounting Standards Board (IASB) should issue an International Financial Reporting Standard requiring disclosure of detailed financial information on companies’ operations by location, in order to make such reporting effectively compulsory for MNEs in about 100 countries.
Despite that, and despite the fact that I was nominated for membership of that review body at the OECD intense lobbying ensured I was excluded. I can't say GE were behind that, but who knows?
Nor has my opinion ever been sought by that review panel. The review panel instead sought opinion from KPMG and PWC. How strange if an objective view was really being formulated. Surely you might ask the person who created the concept something about it if you were being objective? Well, not if you don't want an objective result you wouldn't.
GE opposes disclosure. Could it be that's because, like their friends at Oxford, they're really simply opposed to all corporate taxes, but would rather we didn't know they weren't paying? If so, why are we letting them set policy on this issue?
Isn't it a simple fact that by their actions they're seeking to do three things:
a) Undermine the tax revenues of elected governments, because that's what they're doing;
b) Increase the wealth gap, world wide, because that's what they're doing;
c) Ensure developing countries do not get the tax revenues they need, because that is what is happening.
It may be this is not deliberate - but if it's happening and as a result of GE's lobbying how could we ever believe that for sure?
All three are interesting objectives for Will Morris, but I think they are what his organisation is trying to do. They're a challenge for Will as he's also the Rev Will Morris, a curate at the radical parish of St Martin's in the Fields, Trafalgar Square, London. And I still can't see - despite the fact that I know Will and have discussed this with him often - how these positions can be reconciled. It's beyond my understanding of the Christian faith and its message of good news for the poor that someone with that faith could do the job he does.
He's welcome to respond here - I'll give him his own blog to do so.
But right now it's all too easy to see why GE is paying no tax in the US. And that's at cost to the US, and around the world to the rest of us.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
This has made me so angry. I’ve posted it on FaceBook. It needs to broadcast far and wide. Everyone should know about this huge corruption at the heart of power.
“he’s also the Rev Will Morris, a curate at the radical parish of St Martin’s in the Fields, Trafalgar Square, London”
Whaaaaaatt???!!!!
That’s literally unbelievable. The two positions are literally incompatible and mutually exclusive.
“He’s welcome to respond here – I’ll give him his own blog to do so.”
Come on Will, please respond! How do you justify zero tax on profits of $5.1bn??
@Richard
A remarkable and pretty depressing story even by the standard of the many stories of this ilk that you publicise on your blog. It might be the first post that captures three recuring themes all in one story, though. First the sheer scale of tax avoidance. Second, the sheer scale and scope of regulatory capture and how this is used to distort all aspects of policy making to meet the ends of particular interests groups. Sadly this is a largely unrecognised phenomenon (taking place out of sight and with a veneer of ‘independence’ and ‘credibility’ added through the work of the likes of the Oxford centre for non taxation). And third, the double standards (or should that be a lack of moral compass)of many of those who support avoidance and the avoidance industry.
Utterly depressing and sadly illustrative of why it doesn’t matter how many people march against the cuts in this country and elsewhere. They will happen because real power is concentrated in the hands of elites such as you illustrate here.
Hang on a minute. Paying no tax on $5 billion of profits sounds like a big number, but when you consider that GE actually has $750 billion of total assets on its books the greater part of which relates to its asset financing business GE Capital and that the difference between MACRS tax depreciation for aircraft and rail equipment and standard book depreciation is quite substantial, then I expect the IRS are not too fussed.
If you also take into account the impact of leveraged lease accounting which means that most of the profits from many of their leases will be recognised in the first few years of the lease then the issue is probably more to do with overstatement of book profits (by comparison with IAS norms) than it is to do with tax strategies.
Richard – are you deleting all posts that express a difference of opinion? If so, just make that clear.
@MarkT
You’re making some assumptions where if valid, would make the picture sounds not too bad. But without things like country-by-country reporting, or a general anti avoidance rule, it’s hard to know if your assumptions are right.
Personally, I have a problem with the whole Tax Justice approach of highlighting deals like this. I want somebody to stand up and identify what is a ‘fair’ tax to be paid after legal deductions? 10%? 20%? is 30% ethical? Somebody please tell us when the outrage should stop and start.
I wouldn’t expect a firm like GE to be paying any tax right now. They will have taken some losses in the US consumer credit market and were not bailed out by the US Government. As other have commented they are one of the largest operating lessors in the US aircraft and rail markets and they are also a large owner of wind farms which garner US tax credits. I thought you were in favour of “green” investment Mr Murphy. So to are GE because they are one of the worlds largest manufacturers of turbines and also one of the largest investors in renewable energy.
Just like every other substantial owner plant and machinery, as long as they keep growing, GE are unlikely to pay much tax in the US even if they report accounting profits because of accelerated tax depreciation.
@kim bjo
“it’s hard to know if your assumptions are right.”
The GE Annual report is available on line. I have quite a bit of experience as a financial analyst, and as a rule of thumb I would say that if a company is a pure service company or a company with relatively small capital investment (advertising, broadcasting, publishing etc), then an effective tax rate that is substantially lower than the statutory tax rate looks suspicious.
If a company is relatively capital intensive (airlines, shipping companies, power generators, water companies) then it is hard to draw the same distinction, particularly if they are growing and investing and a 0% tax rate may be reasonable. BA paid no corporation tax for many years despite being relatively profitable (and being very conservative with their tax affairs) simply because the capital allowances at 25% on their new aircraft sheltered all of their taxable profits.
@MarkT
Oh come on – the reason why there is no tax in that case is precisely because of lobbying! You prove my case
@James
Read my comments policy
@kim bjo
Let’s start with the tax rate.
Why not?
@Raul
And you too prove my case – that’s the result of lobbying
Second attempt:
I think your headline is mis-leading.
GE Capital is division of GE. The profits and tax figures you quote are for General Electric as a whole, not just for their banking division.
If you are focusing on GE Capital – it is a bank. The tax paid is likely to be zero for this division due to brought-forward losses incurred following the financial crisis.
Is that some sort of a windup? The lobbying you are talking about was European lobbying which as far as I recall was outside the US.
Every country in the OECD has some form of accelerated depreciation and has done so for many, many years, and the current US Federal system of depreciation has been around since 1986, and is actually less beneficial to the tax payer than previous systems, so hardly the product of recent lobbying.
@raul
Read the article – it refers to US lobbying
And that’s not the sole reason GE does not pay tax
Hello
any comments on this? perhaps a new blog post to dissect it?
http://www.gereports.com/setting-the-record-straight-ge-and-taxes/