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Ireland's political and cultural magazine
— June – July 2013
G
ENERAL Electric (GE) has been
making headlines for all the
wrong reasons in the last cou-
ple of years. Its nuclear power
generators melted down in Fukushima, pop
culture magazine Rolling Stone described it
as part of the modern American mafia and US
critics accused the company of keeping bil-
lions of dollars offshore to avoid US tax. GE
employs , people in Ireland
and operates in more than
countries, with divisions engaged
in healthcare, finance and large-
scale manufacturing, making
everything from locomotives and
electric motors to solar energy
systems and aircraft engines.
Now it appears that Ireland plays
a central role in the company’s tax
avoidance strategy.
GE has significantly increased
its presence in Ireland since the
introduction of the country’s
.% corporate tax rate ten
years ago, and some of its com-
panies are among Ireland’s most
profitable, particularly GE Capital
Aviation Funding, which has
earned profits of more than $.
billion in Ireland since but
paid a total of just $. million in
corporation tax. That’s the equiv-
alent of paying € income tax
on a salary of €,.
These staggering figures
indicate the utility of Ireland’s
.% corporation tax rate for
American companies. GE Capital
Aviation Funding is one of more
than GE companies currently
registered and active in Ireland,
most of which have addresses in Dublin or
Shannon. Ireland offers the means to paying
a lower tax rate and a route to keeping profits
offshore and out of the hands of the American
tax system.
GE is broadly made up of a manufactur-
ing division and GE Capital, and the latter is
a major force in international finance. GE
Capital made multi-billion dollar losses in
the US lately, which was countered by multi-
billion dollar profits in GE Capital’s overseas
division. Overall losses in the US have been
written off against those profits in the manu-
facturing division worldwide, with the result
that GE paid no corporate taxes in the US in
, and earned a tax credit of $. billion
on revenues of $. billion the following
year.
US Senator Carl Levin and
other American legislators have
raised concerns about American
corporations retaining profits
abroad in order to avoid paying
the American corporate tax rates
(of %), and GE is the leader in
this field. Its $ billion of prof-
its retained offshore far exceeds
profits retained offshore by Apple,
Google or Microsoft. However,
American legislators worried that
GE tax income lost by the US is
being gained by Ireland can rest
assured that it’s not the case.
For example, the application
by GE Capital Aviation Funding
of group relief to its income in
Ireland allows the company to
almost entirely cancel out the
.% rate levied by the Irish
government, leaving almost all of
the company’s income as profit.
According to US investiga-
tive organisation Propublica, the
introduction of the American
Job Creation Act in the
USA prompted GE – which runs
the world’s largest aircraft leas-
ing business – to move much of
its aviation finance business to
Ireland, where the company established GE
Capital Aviation Funding at Shannon. GE
Capital Aviation Funding is a group holding
company within the broader GE group, and
is the owner of several other GE aircraft leas-
ing companies in Holland, France, Norway,
Sweden, and Bermuda. According to docu-
ments filed by GE Capital Aviation Funding
between and , the company uses
group relief to reduce its tax obligations in
Ireland to around $, per year. Group
relief allows companies within a group to sur-
render an unused trading loss to a company
within the same group.
In , GE Capital Aviation Funding
earned profits of $ million, which
attracted corporation tax of around $ mil-
lion at the standard rate. After applying group
relief, it paid $, in corporation tax.
In , it paid $, of corporation
tax on profits of $ million. By , prof-
its has risen to $ million and at .%
the tax would have been over $ million,
but the company paid $, after apply-
ing group relief.
In total, from to , GE Capital
Aviation Funding earned profits of $.
billion. According to company records, the
standard tax rate of .% amounted to
$ million. After applying group relief,
GE Capital Aviation Funding paid actual tax
of around $. million. Over the last decade,
GE Capital Aviation Funding has been pay-
ing around .% of its profits in tax. That’s
about /th of the actual rate.
GE Capital Aviation Funding became the
holding company for GE Capital Aviation
Services (GECAS) which has been estab-
lished in Ireland in some form since .
GECAS employed people in Ireland last
year and although it paid only $, in
corporation tax last year, it paid more than
$ million the previous year and more than
$ million in .
The Office of the Revenue Commissioners
said that all companies in Ireland pay the
standard .% on their trading profits
arising in Ireland, and pay a corporation tax
of % on their non-Irish trading income.
The Office said it did not comment on indi-
vidual cases but that reports of lower effective
tax rates “appear to arrive at their figures by
running together the profits earned by group
companies in Ireland and in other jurisdic-
tions and incorrectly suggesting that Irish
tax does or should apply to both”. According
to the financial statements for GE Capital
GE quietly avoids Irish tax and anti-bullying standards. By Ronan Lynch
Generally electric and
stressful tax avoidance
NEWS ge
Over the
last decade,
GE Capital
Aviation
Funding
has been
paying
around
0.03%
of its
prots in
tax. That’s
about
1/400th of
the actual
rate
“
GE Corporate Treasuries.
A former assistant to Ms Morris who
wished to remain anonymous told Village
that the company had resisted the procedure
laid out in the anti-bullying policy document,
starting with its refusal to conduct an inde-
pendent investigation as requested by the
legal counsel. When the internal investigation
began in August , the former assistant
found that other statements supportive of Ms
Morris had not been admitted to the investi-
gation and that she would be the only witness
supporting Morris. She then discovered that
she and another person were to be inter-
viewed before Morris, again in contradiction
of the policy document, and withheld her
statement until the company corrected the
process. The assistant was herself dismissed
in September , and then discovered that
Morris had been left with the impression
that her former assist-
ant was unwilling to share
her statement. The inves-
tigation found against Ms.
Morris who appealed the
result, her former assist-
ant said, but the appeal
was rejected and Morris
was issued with a termina-
tion notice in May.
In the High Court on
May , Ms. Morris’s coun-
sel Richard Kean SC said
that the procedure lead-
ing to her dismissal was
flawed and unfair. Judge
O’Malley granted interim
orders to May restrain-
ing GE Financial Markets
from dismissing Ms. Morris. But according
to a source in GE Ms Morris’s case was set-
tled between the parties. Ms. Morris declined
to comment.
GE’s ‘Imagination at Work’ slogan was
taken too literally by some of its traders. In
a Rolling Stone story last year titled ‘The
Scam Wall Street Learned from the Mafia’,
Matt Taibbi wrote about three GE Capital
traders based in New York who were jailed
in for fraudulently fixing municipal-
bond auctions. Municipal bonds are financial
instruments used by local authorities to raise
money for construction projects such as local
schools or libraries. “You find yourself think-
ing, America’s biggest banks ripped off the
entire country, virtually every day, for more
than a decade!”, wrote Taibbi. “Someday, it
will go down in history as the first trial of the
modern American mafia”.
When we might see the first trial of the
modern Irish mafia, it would be hazardous
to predict.
Aviation Funding, all income derives from
activities carried out in the Republic of
Ireland.
GE is famous for the management style
introduced by former CEO, Jack Welch, well-
known for his aggressive management and
cost-cutting methods. It was Welch, accord-
ing to corporate accountability expert Robert
Weissmann, who popularised the system of
‘management by stress’, where companies
use stress and the fear of job loss to maxim-
ise productivity. The ‘management-by-stress’
technique applied throughout all levels of GE,
but some leading executives took actions
against the company in resistance to what
they perceived as intimidation and unfair
treatment.
Revealingly, in recent years GE has set-
tled lawsuits from whistleblowers and other
dissatisfied employees in recent years rather
than fighting them in court. US law firm
Sanford Heisler represented former presi-
dent and CEO of GE Aviation Materials Marc
Thomas who settled an action on behalf of
himself and other African-Americans at GE.
It also represented Lorene Schafer, the gen-
eral counsel of GE Transportation who took
an action on behalf of herself and “a class of
female employees and female attorneys” in
a gender-discrimination suit that was set-
tled in . The firm also represented
Ed Gormbley, one of GE Capital Service’s
‘Top Talents’ who alleged that the company
destroyed his professional reputation after
he informed management about vast over-
valuation of its assets in .
The management style of GE came to
public attention this summer when hitherto
low-profile GE Financial Markets featured
in press reports about an alleged case of bul-
lying within the company. Dublin-based GE
Financial Markets is the derivatives hub of
the enormous GE business, which operates
in more than countries. According to
finance magazine Treasury & Risk, GE trades
more than one trillion dollars a year in for-
eign exchange, and GE Financial Markets
serves as GE’s face to the financial markets
these foreign exchange and interest-rate
derivatives.
Perhaps illustrating the unorthodox
antipathy to stress-mitigation, GE’s inter-
national ‘Spirit and Letter’ document about
workplace behaviour contains only one line
about bullying, though the Irish Safety,
Health and Welfare at Work Act requires Irish
companies to draw up a specific anti-bullying
policy document. Under the act, complaints
revealing a distinct difference between the
parties may require independent investi-
gation, and there should be no retaliation
against the complainant.
In May , the legal counsel of GE
Financial Markets Lorraine Morris sued to
prevent the company from dismissing her.
According to press reports Ms Morris, who
had been employed by GE Financial Markets
since , took leave due to stress in June
and submitted a complaint to the com-
pany alleging bullying and intimidation by
senior managers. Ms Morris alleged that the
campaign against her was motivated by her
decision, as counsel, to distribute the com-
pany’s anti-bullying policy to its leadership
team. Several of the people named in the
action were senior US-based executives of
GE has settled
a number of
lawsuits from
whistleblowers
and other
dissatised
employees in
recent years
“
