Corporate Taxation: Proposal 2


My first proposal mainly focused on the societal side of the corporate tax rate issue and public disgust with the minuscule and some times negative tax rate some american corporations are paying. For my second proposal, I took a look at the business side of the argument.

My image for this week’s post showed a couple protesters dressed in “Tax Dodger” uniforms, carrying a banner that listed the names and logos of a dozen US corporations who pay significantly less than the listed corporate tax rate. One point that I brought up was the idea that corporations shouldn’t hold the blame for this issue. The government sets the tax rates, and if there are loopholes in the system, it is within the power of those corporations to exploit them. It is just another way to remain competitive in what is an increasingly competitive corporate atmosphere.

GE responded to a 2011 NY Times about GE’s history of tax avoidance. Gary Sheffer, VP of Communications and Public Affairs, stated that their historically low tax rate in 2010 was attributed to losses at GE Capital during the financial crisis and not tax avoidance strategies. He states that in the next year tax rates will return to rates similar to other multinational corporations. While this statement does carry an ounce of truth, it also does a very good job at twisting the truth. GE actively participates in tax avoidance and has a 975 person tax accounting and legal team for just that purpose. Furthermore, the tax rate paid by the average multinational corporations is near half of the 35% set rate.

While it was difficult finding a public statement by any corporation on why or how they avoid paying taxes, their public filings show that they aren’t doing anything illegal and that they fully comply with the IRS. For many companies, GE is a role model. Between 2008 and 2010, the company received a tax benefit of $508 million.

The truth of the matter is that GE, while gaming the tax system, has created an environment where they actually owe minuscule taxes to the government. In the Business Insider article, it is clear that they have complicated the situation with a variety of PR mishaps which have further victimized the company. Every company would like to pay less taxes, much like most individuals in the country. They are being attacked because they are good at it.

John Samuels, head of GE’s tax department and former Treasury tax official, stated that that corporate tax rate in America is too high and as a result deters business in America. He also states that it is within the company’s best interest to keep money abroad in countries with lower tax rates.

Going forward, this will probably be the most difficult of my paper because corporations that pay low tax rates are secretive about their practices and public statements are hard to find.

http://features.blogs.fortune.cnn.com/2011/04/04/ges-taxes-a-case-study/

http://www.propublica.org/article/5-ways-ge-plays-the-tax-game

http://www.businessinsider.com/ge-taxes-2010

http://www.nytimes.com/2011/03/31/opinion/l31ge.html

http://www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersReport.pdf

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2 thoughts on “Corporate Taxation: Proposal 2

  1. “While this statement does carry an ounce of truth, it also does a very good job at twisting the truth. GE actively participates in tax avoidance and has a 975 person tax accounting and legal team for just that purpose.”

    The size of the tax team may have as much to do with the size and scope of GE. A completely aboveboard firm of equal size and complexity could have one as large, maybe?

    Overall, good job diving in. Can you still number your sources? It is a short-hand citation system for blog posts. Like, where you reference the op-ed, put (4) after. In front of your reference, put a “4”. Or hyperlink!

  2. The letter to the editor is exactly what we mean by a business source. It is GE’s perspective.

    You won’t find a firm saying “0 taxes and damn proud of it!” as you say. You need to figure out how they couch their argument.

    This little tidbit is about how GE funded the American Enterprise Institute, a think tank and advocacy group. It might provide some insight.

    http://www.ge.com/files_foundation/pdf/pp_g-aei.pdf

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