Wednesday, March 30, 2011

GE vs. the NYT: dispatches from the battlefield of tax PR

Recently we linked to a New York Times article on General Electric in which it was reported that the company reported worldwide profits of $14.2 billion and $5.1bn in U.S. profits - and paid no tax. In fact, the NYT reported, G.E. claimed a tax benefit of $3.2 billion.

Shocking stuff. GE, of course, came back and said that the report was all hogwash. Well, there's been a lot of back and forth on this. There are various accounts worth reading, including this short reaction, and this CTJ commetary on the extraordinary shenanigans that go on in GE's tax department, and its ability actively to shape the law, with tidbits such as this:
"Provisions of President George W. Bush's huge corporate tax cut bill in 2004 were "so tailored to G.E. and a handful of other companies — that staff members on the House Ways and Means Committee publicly complained...".
This all goes to underline our point about the folly of those who argue that companies merely have a duty to shareholders to minimise their tax liability, within the letter of the law, and that if you are going to complain about tax avoidance then you should complain to government, and to government only. As we have said, it is always essential to remember the Golden Rule: who has the gold makes the rules. Hold governments to account, for sure - but hold the corporations' feet to the fire too. They are, after all, huge players in the creation of tax law, the world over. Just look at Richard Brooks' recent submission to the UK Treasury Select Committee on the horrors of UK plans to eviscerate the corporate income tax for multinationals, to get a flavour (we hope to blog this in more detail soon.)

But down to specifics on GE, and here is a fascinating account by Business Insider, which describes a complex dance between themselves and GE's public affairs department:
"We asked some specific questions of GE--because we wanted to determine whether the New York Times was wrong or whether GE was just trying to spin everyone."
And the result? Well, there's quite a lot to report; here is a sample:
"We asked GE whether the New York Times had, in fact, "grossly oversimplified the facts" or had just gotten them wrong.

GE temporarily went silent.

So we asked again.

And again.

Eventually, GE piped up, with a non-answer."
There was the GE statement, which suggested that the NYT was wrong - though that turned out, Business Insider found, not to be as simple as all that. And the debate went on, for quite some time. The story ends, via a first update (and a whole lot more back and forth), concluding that both GE and the NYT were wrong. And then came update 2:
"Wow, just when we thought it was over... The NYT may be off the hook, at least on the "federal income tax" assertion. No sooner had we published our conclusion that the NYT's statement was "flat-out wrong" than the NYT came right back and said there wasn't a single factual inaccuracy in its article, which was why GE hadn't asked for a correction. And, more importantly, the NYT sent us an AFP article in which GE spokesperson Anne Eisele--the same spokesperson who wrote the comment below--said the following: "GE did not pay US federal taxes last year because we did not owe any."
. . . .
It suggests that GE is still trying to find a way, any way, to talk its way out of this, even if that means giving out false information. . . . We have asked Anne and GE, once again, to explain themselves. They're working on getting us a response."
We hope Business Insider doesn't mind our reproducing (with picture quality degraded, to blunt copyright issues) their photo of GE's Jeff Immelt, with the excellent caption
"The New York Times is full of it. Just ask my PR team."

Oh, and take a look at Francine McKenna's article about GE's auditor KPMG, noting among other things that it has been the KPMG auditor for - yes - 102 years, and complementing CTJ's analysis about KPMG's lobbying power.


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