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GE: 7,000 tax returns, $0 U.S. tax bill

jamesrage

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I have mixed feelings on this. Yes everyone should pay their fair share. But at the same time you could put a 50% tax on businesses and they would pass those costs onto the consumer just like when they buy materials,equipment, pay for employees and other things used to make a product. This is why I laugh my ass off when die hard anti-smokers think big tobacco companies suffered, especially many of those tobacco companies own food companies the die hard anti-smoking people buy food products from. Why would companies not pass taxes onto the consumer?

GE: 7,000 tax returns, $0 U.S. tax bill - Apr. 16, 2010

NEW YORK (CNNMoney.com) -- General Electric filed more than 7,000 income tax returns in hundreds of global jurisdictions last year, but when push came to shove, the company owed the U.S. government a whopping bill of $0.

How'd it pull off that trick? By losing lots of money.

GE had plenty of earnings last year -- just not in the United States. For tax purposes, the company's U.S. operations lost $408 million, while its international businesses netted a $10.8 billion profit.

That left GE (GE, Fortune 500) with no U.S. profit left for Uncle Sam to tax. Corporations typically face a 35% federal income tax on their earnings. Thanks to its deductions and adjustments, GE reported an actual U.S. federal income tax rate of negative 10.5%. It got to add a "tax benefit" of $1.1 billion back into its reported earnings.

"This is the first time in at least decades that GE has reported negative U.S. pretax income and it reflects the worst economy since the Great Depression," Anne Eisele, GE's director of financial communications, said via e-mail.

But what about the $10.8 billion profit overseas? GE is "indefinitely" deferring income tax payments on those profits, Eisele said.
 
Why doesn't this happen to me? :(
 
I have mixed feelings on this. Yes everyone should pay their fair share. But at the same time you could put a 50% tax on businesses and they would pass those costs onto the consumer just like when they buy materials,equipment, pay for employees and other things used to make a product. This is why I laugh my ass off when die hard anti-smokers think big tobacco companies suffered, especially many of those tobacco companies own food companies the die hard anti-smoking people buy food products from. Why would companies not pass taxes onto the consumer?

Perhaps because they can't. A company's ability to pass the tax along depends on the price elasticity of the underlying product. Price elasticity deals with the consumers propensity to keep buying a product at a higher price. Consumers will continue to pay more and more for certain products, such as gasoline at the expense of other products they like to buy, but can live without (perhaps like the newspaper). Companies that offer products that are elastic can not pass taxes along as their attempt to increase prices is more than offset by a decline in the number of units people will buy. Given, according to economic theory, that prices rise to the point of elasticity, in theory, companies can not simply pass a tax increase along to its customer, as the customer just buys less.

In other words, if people are willing to pay $1.00 of a soda and the government raises income taxes on the soda company, that company's attempt to pass the tax increase along to the consumer could likely be met with a decline in sales....

The extent to which taxes are divided between manufacturer and consumer is usually referred to as the incidence of tax. Rarely does the manufacturer nor the consumer get 100% of the incidence, its usually divided.... in accordance with the price elasticity of the underlying product.

So, yes.... GE can pay taxes.
 
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Perhaps because they can't. A company's ability to pass the tax along depends on the price elasticity of the underlying product. Price elasticity deals with the consumers propensity to keep buying a product at a higher price. Consumers will continue to pay more and more for certain products, such as gasoline at the expense of other products they like to buy, but can live without (perhaps like the newspaper). Companies that offer products that are elastic can not pass taxes along as their attempt to increase prices is more than offset by a decline in the number of units people will buy. Given, according to economic theory, that prices rise to the point of elasticity, in theory, companies can not simply pass a tax increase along to its customer, as the customer just buys less.

It depends on what they manufacture and besides less sales means less money and therefore less taxes collected.

In other words, if people are willing to pay $1.00 of a soda and the government raises income taxes on the soda company, that company's attempt to pass the tax increase along to the consumer could likely be met with a decline in sales....
What does G.E. make? You do not think they would pass those cost onto other products?


The extent to which taxes are divided between manufacturer and consumer is usually referred to as the incidence of tax. Rarely does the manufacturer nor the consumer get 100% of the incidence, its usually divided.... in accordance with the price elasticity of the underlying product.

Taxes are just another expense towards making a product just like labor, materials, equipment and so on. If they make multiple products they might change the prices to help compensate.


So, yes.... GE can pay taxes

G.E. won't be the one paying it, it will be the consumers.Because G.E. makes everything from lightbulbs(which people do need) to industrial automation and much more.
 
Congratulations, GE has been exposed for using one of the many loopholes which exist in the system to get tax credit. If you're smart enough to find them, pretty much anyone can reduce what they owe by quite a bit.
 
Congratulations, GE has been exposed for using one of the many loopholes which exist in the system to get tax credit. If you're smart enough to find them, pretty much anyone can reduce what they owe by quite a bit.

Individuals don't have anywhere near the opportunity to do this.
 
I don't see anything wrong with it. They didn't make any money here to tax.
 
Individuals don't have anywhere near the opportunity to do this.

You're 100% right.

If you're an American citizen working and living in a foreign country you are required to file your taxes on your earnings in that foreign country.
You are allowed to deduct your foreign taxes but you still have to pay your American taxes.
 
You're 100% right.

If you're an American citizen working and living in a foreign country you are required to file your taxes on your earnings in that foreign country.
You are allowed to deduct your foreign taxes but you still have to pay your American taxes.

They have no income to deduct their foreign taxes from! That's why it's deferred.
 
They have no income to deduct their foreign taxes from! That's why it's deferred.

They earned a profit in a foreign country, something that an individual would be taxed on.
Gross profit - losses = net profit - foreign taxes = total net profit for tax purposes.

They could do it just like the rest of us would have to if we lived and worked in another country.
 
Congratulations, GE has been exposed for using one of the many loopholes which exist in the system to get tax credit. If you're smart enough to find them, pretty much anyone can reduce what they owe by quite a bit.

Yes, its called off-shoring: off-shore the jobs and off-shore the revenues.
 
They earned a profit in a foreign country, something that an individual would be taxed on.
Gross profit - losses = net profit - foreign taxes = total net profit for tax purposes.

They could do it just like the rest of us would have to if we lived and worked in another country.

Companies get to deduct their losses. They always have. GE isn't exactly playing tricks here. They have to pay eventually, that's what the "deferred" part means.
 
I have mixed feelings on this. Yes everyone should pay their fair share. But at the same time you could put a 50% tax on businesses and they would pass those costs onto the consumer just like when they buy materials,equipment, pay for employees and other things used to make a product. This is why I laugh my ass off when die hard anti-smokers think big tobacco companies suffered, especially many of those tobacco companies own food companies the die hard anti-smoking people buy food products from. Why would companies not pass taxes onto the consumer?

GE: 7,000 tax returns, $0 U.S. tax bill - Apr. 16, 2010

NEW YORK (CNNMoney.com) -- General Electric filed more than 7,000 income tax returns in hundreds of global jurisdictions last year, but when push came to shove, the company owed the U.S. government a whopping bill of $0.

How'd it pull off that trick? By losing lots of money.

GE had plenty of earnings last year -- just not in the United States. For tax purposes, the company's U.S. operations lost $408 million, while its international businesses netted a $10.8 billion profit.

That left GE (GE, Fortune 500) with no U.S. profit left for Uncle Sam to tax. Corporations typically face a 35% federal income tax on their earnings. Thanks to its deductions and adjustments, GE reported an actual U.S. federal income tax rate of negative 10.5%. It got to add a "tax benefit" of $1.1 billion back into its reported earnings.

"This is the first time in at least decades that GE has reported negative U.S. pretax income and it reflects the worst economy since the Great Depression," Anne Eisele, GE's director of financial communications, said via e-mail.

But what about the $10.8 billion profit overseas? GE is "indefinitely" deferring income tax payments on those profits, Eisele said.


Which is why all companies that are outsourcing labor like this need to be taxed 65% of all monies earned outside the country. They can then reduce this tax bill to 5% by returning those assets to the United States (thereby creating jobs for Americans).
 
You're 100% right.

If you're an American citizen working and living in a foreign country you are required to file your taxes on your earnings in that foreign country.
You are allowed to deduct your foreign taxes but you still have to pay your American taxes.

And if you have zero American sourced income, your foreign tax credit is 100% and you pay nothing, just like GE.
 
Companies get to deduct their losses. They always have. GE isn't exactly playing tricks here. They have to pay eventually, that's what the "deferred" part means.

Speaking of which, what Congress should do is drop the tax rate on repatriated income to like 10% for a year and have all of it go towards debt reduction. There are hundreds of billions (if not a trillions) dollars of income that is sitting outside of the US deferred. Big firms like IBM often will take out unsecured loans with a wink and a smile about what is the real collateral. Allowing firms to repatriate foreign income at a super low rate could put a rather large dent in our debt.
 
And if you have zero American sourced income, your foreign tax credit is 100% and you pay nothing, just like GE.

I've been lead to believe that you pay taxes on your income no matter where it is earned.
Meaning that even after you deduct for foreign taxes you must still pay American taxes on any income earned outside the U.S.

We're are supposedly the only country that does this.
 
I've been lead to believe that if you pay taxes on your income no matter where it is earned.

This is correct.

Meaning that even after you deduct for foreign taxes you must still pay American taxes on any income earned outside the U.S.

Sort of.

The foreign tax credit is a percent of how much foreign sourced income you have.

For instance, say you have $100 in tax liability and paid $35 in foreign tax on that income. The US would tax you $28. To determine your foreign tax credit, you figure out how much of your income is US vs Foreign sourced. In this case, as 100% of your income is foreign sourced, you get 100% of the foreign taxes paid as a credit, thereby eliminating your entire US liability (not refundable though), thus you pay nothing. Now, however, if 50% of that income was US sourced, you'd only get 50% of your tax credit, and thereby pay $10.5 in US taxes. It really depends on how much of your income is sourced to the US vs foreign.
 
Speaking of which, what Congress should do is drop the tax rate on repatriated income to like 10% for a year and have all of it go towards debt reduction. There are hundreds of billions (if not a trillions) dollars of income that is sitting outside of the US deferred. Big firms like IBM often will take out unsecured loans with a wink and a smile about what is the real collateral. Allowing firms to repatriate foreign income at a super low rate could put a rather large dent in our debt.

You're a CPA right? I'm hoping to take the test in October.

Hopefully then I'll be able to spout business taxation law like you! :mrgreen:
 
Corporations typically face a 35% federal income tax on their earnings. .
Which is probably why so much of their business is overseas to begin with.
 
It depends on what they manufacture and besides less sales means less money and therefore less taxes collected.


What does G.E. make? You do not think they would pass those cost onto other products?




Taxes are just another expense towards making a product just like labor, materials, equipment and so on. If they make multiple products they might change the prices to help compensate.




G.E. won't be the one paying it, it will be the consumers.Because G.E. makes everything from lightbulbs(which people do need) to industrial automation and much more.

OK. You can once again read the full answer, as per above, or I will give you the simple version: Companies can not simply pass a tax along. In some cases they can, in other cases they can't...Usually a tax increase is shared by manufacturer and customer in varying portion. It depends on the product.
 
It depends on what they manufacture and besides less sales means less money and therefore less taxes collected.


What does G.E. make? You do not think they would pass those cost onto other products?




Taxes are just another expense towards making a product just like labor, materials, equipment and so on. If they make multiple products they might change the prices to help compensate.




G.E. won't be the one paying it, it will be the consumers.Because G.E. makes everything from lightbulbs(which people do need) to industrial automation and much more.

OK. You can once again read the full answer, as per above, or I will give you the simple version: Companies can not simply pass a tax along. In some cases they can, in other cases they can't...Usually a tax increase is shared by manufacturer and customer in varying portion. It depends on the product.

The concept is called "incidence of tax". It is a basic principle of economics.
 
I have mixed feelings on this. Yes everyone should pay their fair share. But at the same time you could put a 50% tax on businesses and they would pass those costs onto the consumer just like when they buy materials,equipment, pay for employees and other things used to make a product. This is why I laugh my ass off when die hard anti-smokers think big tobacco companies suffered, especially many of those tobacco companies own food companies the die hard anti-smoking people buy food products from. Why would companies not pass taxes onto the consumer?

I think companies that do this should get a big fat fine. In GE's case it should be over a billion dollars. Or perhaps they should be audited and made to pay a fine of what their tax should have been before they got creative with their accounting.
 
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