HANOVER, New Hampshire (Reuters) - The United States needs to reform its corporate tax code and should consider eliminating all loopholes that allow companies to pay less than the statutory rate, General Electric Co (GE.N)’s chief said.
The largest U.S. conglomerate would accept the elimination of loopholes “in a heartbeat” if it was coupled with a lowering of the statutory 35 percent rate, Jeff Immelt told a group of students on Thursday.
“Corporate tax in this country needs to be reformed,” Immelt said at Dartmouth College, in Hanover, New Hampshire. “Stuff that the deficit commission came up with, which was a lower corporate tax rate ending every loophole, is what we would take, with a territorial system, we would take in a heartbeat. The fact is I’d take Germany’s or Japan’s or the U.K.’s corporate tax policy today, sight unseen, without any dispute, I would take any of those tax policies today.”
A so-called Congressional “super committee” is working on a way to find another $1.2 trillion in cuts from the nation’s budget over the next decade, terms that were part of the recent deal to raise the U.S. debt limit and avoid a default. Existing tax breaks for businesses and individuals cost the government some $1 trillion per year, but Republicans may agree to cutting those if the move is coupled with a reduction in the top tax rates for companies and people.
Immelt also acknowledged the criticism the world’s largest maker of jet engines and electric turbines came under this year for its recent low tax rate. A study released in June by the left-leaning research group Citizens for Tax Justice found that GE had an effective tax rate of negative 61.3 percent in 2010, making it one of at least eight big U.S. companies to record a tax benefit rather than a bill for the year.
“GE has paid tens of billions of dollars in taxes over the last decade,” he told the crowd at the Ivy League university where he played football as an undergraduate. “Our technique for paying low taxes in 2009 and 2010 was writing off $32 billion (in losses) at our financial service business. I don’t recommend it.”
Troubles at the GE Capital arm contributed significantly to the company’s woes during the financial crisis that sent its shares to 18-year lows in early 2009. They have since rebounded to almost three times their crisis level and closed at $15.34 on Thursday, down 5.5 percent on a day the U.S. stock market dropped sharply.
‘RUBBISH’ THAT UNCERTAINTY HAMPERING INVESTMENT
Immelt, who leads a panel advising the Obama administration on job creation, said he puts little stock in talk that the government could do more to encourage companies to invest and lower the nation’s persistently high unemployment rate.
“A lot has been said that business isn’t investing because of uncertainty. I think that’s rubbish,” the 55-year-old CEO said. “The government couldn’t do anything to make me invest and believe me the rest of the world isn’t that stable either. We’ve made our own choices that we’re going to keep investing regardless of what happens in Washington.”
But in an uncharacteristically animated moment, he blasted critics who contend that companies like GE that do much of their sales outside the United States are hurting the economy. He noted that GE sells 90 percent of its jet engines abroad but manufacturers all of them in U.S. factories.
“That’s not taking jobs out of the United States, that’s what we have to do,” Immelt said. “We’ve gotten this psychotic thing that anybody that does business outside the United States is a heathen, anti-American ... I don’t understand why we’re rooting against companies that are out there competing because we’re creating good jobs here.”
Reporting by Scott Malone, editing by Bernard Orr