Let’s hand that one over to David Cay Johnston, who published this investigation into GE taxes in Tax Notes International in 2008:
In 2005 the new manager of a General Electric sub- sidiary in Brazil that made light bulbs and lighting equipment got a tip, the company says. It led to his discovering something curious in the company’s records: Up to 64 percent of annual sales were re- corded as going to wholesale distributors in lightly populated regions near the Amazon River…
Moreira’s report explained that urban Brazilian states charged the subsidiary a 19 percent VAT on its bulbs, switches, and fixtures, while the rural states charged just 7 percent or none at all…
The internal documents offer a rare and candid look at how, behind closed doors, GE executives, managers, and lawyers dealt with evidence of systematic tax cheating that flourished over many years.
The internal documents show that the scheme Moreira found was no anomaly at the Brazilian lighting operation, known as GE Lighting or GEVISA. The documents discuss a second Brazilian invoicing scheme to escape state-level VAT and a separate system to evade tens of millions of dollars in Brazilian payroll taxes on compensation to the sales force, which did business in other Latin American countries as well…
The amount of Brazilian state-level VAT at issue, based on Moreira’s report and the other documents, appears to be less than $100 million. But that amount is only for the periods for which specific details can be extracted from the documents. Since the VAT scheme appears to have gone on long before the period covered in the Moreira report, the total sum could be much larger and could involve other countries supplied by the Brazil subsidiary.
It’s an interesting read, to say the least.
The second prong of the GE pushback was on Twitter, where its flacks went to help spread their “we pay lots of taxes” message. That began to backfire on Monday.
Before it suddenly quit tweeting about the issue, it pestered multiple Twitterers with its claim that GE paid $2.7 billion in cash taxes in 2010 (not mentioning to whom it paid them). GE also said that “The Times erroneously suggests GE makes use of tax ‘loopholes,’” as if GE, with its thousand-person-strong tax department, is the only big company in America that doesn’t take advantage of tax loopholes. When you say things like that, it’s awfully hard to trust anything else you say.
GE then got into something of a feud with Blodget:
Stop the misleading attacks. No Taxes?? GE paid $2.7 billion in cash taxes alone in 2010. http://bit.ly/goMKB9
Again, that $2.7 billion is what GE paid to government all around the world, not to the U.S. The Times didn’t say or imply that GE paid no taxes around the world. Blodget then wrote an account of how GE almost tricked him into believing they were right and the Times was wrong. Then he reversed course after the Eisele comment and reversed course again when the Times pointed out her previous statement that contradicted her comment. That’s not Blodget’s fault and he was quick to update when he found new information and to explain where the uncertainty lied.
THE TRUTH ABOUT THE NYT-GE TAX SPAT: They’re Both Full Of Crap!
That’s false equivalence and Blodget of all people—after getting the runaround and eventually radio silence from GE—should know that. Here’s what he says about the Times:
The New York Times is full of crap. Although we haven’t yet determined for certain that GE’s US federal income tax bill will be more than zero (neither has GE), the NYT’s statement that GE’s “American” tax bill in 2010 was “none” is, at best, highly misleading. GE paid loads of American taxes in 2010, even before you get to the federal income tax question. A reasonable New York Times reader would have no idea that the phrase “American tax bill” was supposed to mean only “federal income taxes” and this reader would therefore be surprised to learn that GE actually paid lots of local, state, and payroll taxes. We assume the New York Times aspires to be more accurate than “highly misleading,” so we think the paper should issue a correction.