Tuesday, November 22, 2011

Compliance Costs But Reaps Big Rewards

Marginal Revolution reports that General Electric's tax return was 57,000 pages in size.

To put it in perspective, the entire US tax code is 72,536 pages (in 2006 it was 16,845 pages).

In return for this monumental display of compliance and finding every favorable term of the tax laws and regulations, GE on a profit of $14 billion with $5.1 billion for its US operations paid no income taxes.

Think of the amount of time, energy and economic effort wasted to produce 57,000 pages.

Then think for the need to make our tax code a lot simpler and straightforward to both understand, comply with.

Such a simplification would ensure that other businesses and individuals can reap the same benefits as GE rather than GE being able to pay no taxes by virtue of its size. GE due to having a massive accounting department and a huge size has the ability to operate in a way to negate any tax by a careful application of numerous laws, subsidies and credits that while politically nice may be economically very wasteful. While GE saves on taxes, its probably wasting tons of money not just by all the tax compliance measures, but by inefficient projects taken in the quest for tax credits and write-offs.


Scott said...

I'm going to pitch a tent in front of GE in protest. I'll not take a bath, and I'll defecate wherever I please.

That'll show 'em that their corporate greed will not be tolerated. I'm sure all the local businesses will give me free food and water while I'm there.

Yeah, that'll work.

Aaron said...

You can't really blame GE for taking advantage of legal tax reduction strategies.

You can, however, blame them for lobbying and other influence peddling to get those strategies enacted into law for their advantage to other business and individual's disadvantage.

Unfortunately, the current tax system is fraught with such regulations put into place by whatever lobbyist or interest group deems fit and thus was created the mess the tax code currently has become and continues to worsen.