Loophole-loving GE says it advocates closing all tax loopholes.
NEW YORK (TheStreet) -- General Electric(NYSE:GE) says it advocates closing all tax loopholes, an event that would almost certainly result in the company paying more taxes, according to a pair of tax experts.
General Electric has a reputation as one of the most effective U.S. companies at minimizing its tax bill. The company's tax strategies attracted widespread attention in March, when they became the subject of a front page story in The New York Times that, among other highlights, pointed out that GE paid no federal taxes in 2010 despite earning $14.2 billion, including $5.1 billion in the U.S. In fact, the story notes, GE got a tax benefit of $3.2 billion last year.
That now-notorious GE tax return is back in the news thanks to Rep. Paul Ryan, who told attendees at a recent townhall meeting that, if printed out, it would total some 57,000 pages.
Ryan called attention to the size of the return to underscore the need for corporate tax reform, as a bipartisan 12-member Congressional "super-committee" charged with addressing the deficit nears a deadline next week. If they fail to reach a deal before the deadline, a series of drastic cuts are set to kick in.
Asked about Ryan's comments, a General Electric spokesman sent a statement to TheStreet that read: "We agree with Congressman Ryan that the U.S. tax system needs to be reformed and all loopholes should be closed. Furthermore, Congress needs to lower the corporate rate and provide the US a territorial system like every other major country in the world."
Under a territorial system, U.S. companies operating abroad would only be taxed on foreign profits in the countries where those profits were booked. Currently, U.S. companies also pay U.S. taxes on foreign profits, though they receive credits on taxes they paid to other governments.
Rebecca Wilkins, senior counsel with the nonprofit Citizens for Tax Justice, regarded GE's statement with suspicion.
"You've got to wonder why GE would want the system to be changed. I mean how much more negative would they like their rate to go? They are hugely benefitting from the current system," she says.
Lowering the corporate tax rate but eliminating a lot of the special deductions exemptions and credits "absolutely means GE's tax rate would go up," according to Wilkins. "I mean there's no place for it to go but up. GE might publicly say that it's all for tax reform but will they actually support it when it goes through Congress? I suspect they won't. I bet they'll have an army of lobbyists in there trying to fight the tax reform."
Robert Willens, tax consultant with Robert Willens LLC agreed with Wilkins that "if we eliminated loopholes and went to a territorial system GE would probably be paying more taxes than it is today."
However, he isn't convinced GE is being disingenuous when it says it want to close loopholes.
"Maybe they do feel that way. That if things were simplified and the rates were lower and we were territorial, there wouldn't be nearly as much need on their part to manage their tax position. They could get on with the business of doing other things," Willens says.
-- Written by Dan Freed in New York. Follow this writer on twitter.