Generally electric and stressful tax avoidance

 —  June – July 2013

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

prots in

tax. That’s

about

1/400th of

the actual

rate

“

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