Friday, April 1, 2011

GE $0 tax game

According to the NY Times 
Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.
GE reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Forbes argues that the tax rate is higher in US compared to the rest of the world.
But it's the tax benefit of overseas operations that is the biggest reason why multinationals end up with lower tax rates than the rest of us. It only makes sense that multinationals "put costs in high-tax countries and profits in low-tax countries," says Scott Hodge, president of the Tax Foundation. Those low-tax countries are almost anywhere but the U.S. "When you add in state taxes, the U.S. has the highest tax burden among industrialized countries," says Hodge. In contrast, China's rate is just 25%; Ireland's is 12.5%.
However, According to the 10K

At year-end 2010, General Electric Company and consolidated affiliates employed approximately 287,000 persons, of whom approximately 133,000 were employed in the United States. For further information about employees, see Part II, Item 6. “Selected Financial Data” of this Form 10-K Report.

In 2010, approximately 53% of our revenue was attributable to activities outside the United States. It's total revenue is $150.2 Billion
So, putting all the above information together, here is the summary.

Revenues, Profits, Employees and Taxes

Revenues in US                  $70.5 B    ($150.2 Billion * 0.47)
Revenues outside US           $79.6 B   ($150.2 Billion * 0.53)

Pre-tax income in US:                       $10.3 Billion
Pre-tax income outside US:              $3.9 Billion ($14.2 - 10.3)

Profits in US:                      $5.1 Billion
Profits outside US:              $9.1 Billion

Employees in US:                 133,000
Employees outside US:          154,000

Employees per $Bn of Revenue
In US:                                               1884   (133,000/70.6)
Outside US:                                     1934   (154,000/79.6)

Taxes paid in US $0

Though it paid no taxes (and got a credit), GE employs more non-US employees per $1 Bn of revenue generated out side the US (1934), compared to US employees within US for every $1B of revenue generated inside US (1884).