Archive
G.E.’s Strategies Let It Avoid Taxes Altogether – NYTimes.com
BUT NOBODY PAYS THAT
G.E.’s Strategies Let It Avoid Taxes Altogether
By DAVID KOCIENIEWSKI
Published: March 24, 2011
General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.
In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.
Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.
Yet many companies say the current level is so high it hobbles them in competing with foreign rivals. Even as the government faces a mounting budget deficit, the talk in Washington is about lower rates. President Obama has said he is considering an overhaul of the corporate tax system, with an eye to lowering the top rate, ending some tax subsidies and loopholes and generating the same amount of revenue. He has designated G.E.’s chief executive, Jeffrey R. Immelt, as his liaison to the business community and as the chairman of the President’s Council on Jobs and Competitiveness, and it is expected to discuss corporate taxes.
“He understands what it takes for America to compete in the global economy,” Mr. Obama said of Mr. Immelt, on his appointment in January, after touring a G.E. factory in upstate New York that makes turbines and generators for sale around the world.
A review of company filings and Congressional records shows that one of the most striking advantages of General Electric is its ability to lobby for, win and take advantage of tax breaks.
Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines. But the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.
Company officials say that these measures are necessary for G.E. to compete against global rivals and that they are acting as responsible citizens. “G.E. is committed to acting with integrity in relation to our tax obligations,” said Anne Eisele, a spokeswoman. “We are committed to complying with tax rules and paying all legally obliged taxes. At the same time, we have a responsibility to our shareholders to legally minimize our costs.”
The assortment of tax breaks G.E. has won in Washington has provided a significant short-term gain for the company’s executives and shareholders. While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion.
But critics say the use of so many shelters amounts to corporate welfare, allowing G.E. not just to avoid taxes on profitable overseas lending but also to amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. They say that the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States.
Full article at New York Times link below
G.E.’s Strategies Let It Avoid Taxes Altogether – NYTimes.com.
rise of the picosecond
The rise of the picosecond
03 Mar 2011
Just when you thought high-speed cash equities trading could not get any faster, trading geeks have thrown a new concept into the mix: the picosecond.
A second is a long time in cash equities trading. Four or five years ago, trading firms started to talk of trading speeds in terms of milliseconds.
A millisecond is one thousandth of a second or, put another way, 200 times faster than the average speed of thought. In the time it took your brain to tell your hand to click on this article, a broker or market-making firm trading in milliseconds could fill hundreds of orders on an exchange.
Milliseconds, however, are now ancient history. In the past two or three years, trading speeds have been shaved down to inconceivably tiny increments: from milliseconds to microseconds, and more recently to nanoseconds.
But in recent weeks trading geeks have started to talk about picoseconds in what is a truly mind-boggling concept: a picosecond is one trillionth of a second. Put another way, a picosecond is to one second what one second is to 31,700 years.
Speaking at a London conference on Tuesday, Donal Byrne, chief executive of Corvil, a high-speed trading technology company, caused a ripple of audible incredulity throughout the room when he suggested that trading speeds could be reduced to picoseconds in the not too distant future.
For those whose brains have not instantly combusted at the concept, the rise of the picosecond prompts an obvious question: why on Earth (which spins at a rate of 460 meters a second) is it necessary to trade so fast?
The answer is simple. Firms that trade super fast effectively put themselves at the front of the trading queue and have priority over other orders. This position gives them better information on the trading behaviour of other investors and allows them to react faster.
In a bull market, speed can ultimately make for beefy profits, but in a bear market these tiny fractions matter more than ever. The potential value of millisecond, or indeed a picosecond, was vividly demonstrated during a particularly bloody period on Black Friday, October 10, 2008, when the UK market plummeted at a hair-raising £250m a second.
Source e financial news link below
Can America Function More Like a Fiscally Responsible Company? It’s up to Us, the Shareholders
We expect perfection from companies in Silicon Valley. The general consensus is that Yahoo is one of the worst run tech companies in the world, never mind it’s still profitable, cash-rich, and one of the largest media assets in the world. We get outraged and hit the BUBBLE! panic button when valuations of startups like Facebook, Zynga and Twitter get in the double digit billions, never mind their growth rates, user engagement and (in the case of Zynga an Facebook) actual revenues.
So how can we be so apathetic when we see true abysmal fiscal neglect, especially when it’s that of a pseudo-company in which we all essentially own shares?
That pseudo-company is the United States government and in a thorough report issued today, Kleiner Perkins partner Mary Meeker has taken all emotions, politics, spin and manipulation out of the issues, to present a steely-eyed view of just how hosed our financial situation is. Spoiler alert: It’s not pretty. America is gripped by a new red menace and this time, it’s not the commies– it’s a sea of red ink. If politicians reported to voters the way management reports to shareholders, no one would finish out their terms.
If you’re a tax-paying American, you should read the report (embedded below) to see how your money is being spent. If you’re not an American, you should read it too. Far too often blogs like ours trumpet the advantages of living and starting a business in this country, of which there are many. But here’s a sober view of the downside of our wishfully innate belief that we deserve to have it all: We are in a deep financial hole, and there’s not an easy, pain-free or politically palatable way out.
But let’s leave politics aside, as Meeker and her team do, and look at some of the financials. America’s revenue has been flat for ten years. 40% of that income comes from individual tax payers. This surprised me: If you exclude Medicare and Medicaid and one-time charges, America’s profit & loss statement isn’t bad. We have had a 4% median net margin over the last 15 years.
But Medicare and Medicaid are huge exclusions, and Meeker’s report points the finger at them as the biggest culprit for why our financial situation is so untenable. Thanks largely to these unfunded entitlement programs, our cash flow is negative $1.3 trillion, or about $11,000 per household. This isn’t a George W. Bush or Barack Obama issue. Cash flow has been negative for each of the past nine years.
There are a few reasons the situations with Medicare and Medicaid are so bad. First, unlike social security and unemployment, there is no direct funding mechanism to support these programs. Second, the cost is 10x higher than was projected when Medicare and Medicaid were enacted. Why were the estimates so far off? It’s a combination of the aging population, people living longer while the retirement age has barely budged, higher-dollar expectations of care as medical advances have been achieved, and an expansion of who can receive these programs.
And there’s a bad market force at play: Private sector costs increase to help offset lower-cost public programs, which only pushes more people out of privately-funded programs and into public ones. More than 35% of the US population receives entitlement dollars or is on government payroll, up from 20% in 1966.
The report examines the cultural impact of this, asking, “Given the high correlation of rising entitlement income with declining savings, do Americans feel less compelled to save if they depend on the government for their future savings? It is interesting to note that in China the household savings rate is ~36%, per our estimates based on CEIC data, in part due to a higher degree of self-reliance – and far fewer established pension plans. In the USA, the personal savings rate (defined as savings as percent of disposable income) was 6% in 2010 and only 3% from 2000 to 2008.”
Indeed, if it weren’t for Medicare and Medicaid, the numbers show there’d be plenty of room tospend more on defense, education, law enforcement, transportation, infrastructure and energy and still break-even. Meeker notes that our global competitors– particularly countries like China and India– are investing more heavily in those areas.
There’s much more on the financials in Meeker’s report, and some recommendations of how to boost revenue long term through R&D spending and immigration reform. But the interesting thing is why she wrote it: Because for all the hand-wringing over the cost of health care and the state of our deficit, she had a hard time finding the simplest data for what America’s financial situation was.
Last year at her annual Web 2.0 Summit address, she included a slide showing America’s flat revenue, before she got into her presentation on mobile computing, and was stunned at how many people came up to her afterward to express their shock that our revenues weren’t growing. It convinced her to spend some time taking a deep look at America’s financials, and pull out all the politics and emotion to just look at the facts– something we almost never get in a world where our top news sources are Glen Beck, MSNBC and the Daily Show. As a result there’s something for every party or talking head to love and hate in the report– the true sign of balance. Meeker started the project while still at Morgan Stanley, and said in a call this morning she’s going back to her day job tomorrow. There’s no USA, Inc. Part 2 coming out, and no Al Gore-like “Inconvenient Truth” tour planned. It was a one-time project, born of her own curiosity and belief that Americans should know where their money is going.
Hit the link for full story Can America Function More Like a Fiscally Responsible Company? It’s up to Us, the Shareholders. Source Techcrunch
The Future of Money: It’s Flexible, Frictionless and (Almost) Free | Magazine
A simple typo gave Michael Ivey the idea for his company. One day in the fall of 2008, Ivey’s wife, using her pink RAZR phone, sent him a note via Twitter. But instead of typing the letter d at the beginning of the tweet — which would have sent the note as a direct message, a private note just for Ivey — she hit p. It could have been an embarrassing snafu, but instead it sparked a brainstorm. That’s how you should pay people, Ivey publicly replied. Ivey’s friends quickly jumped into the conversation, enthusiastically endorsing the idea. Ivey, a computer programmer based in Alabama, began wondering if he and his wife hadn’t hit on something: What if people could transfer money over Twitter for next to nothing, simply by typing a username and a dollar amount?
A brief history of
currency technology.
—Bryan Gardiner
9000 BC: Cows The rise of agriculture made commodities like cattle and grain ideal proto-currencies: Since everyone knew what a heifer or a bushel was worth, the system was more efficient than barter.
Just a decade ago, the idea of moving money that quickly and cheaply would have been ridiculous. Checks took ages to clear. Transferring money from one bank account to another could take days, as banks leisurely handed off funds, levying fees nearly every step of the way. Credit cards made it a little easier to pass money to a friend — provided that friend owned a credit card reader and didn’t mind paying a few percentage points in fees or waiting a couple of days for the payment to process.
Ivey got around that problem by using PayPal. Since 1998, PayPal had enabled people to transfer money to each other instantly. For the most part, its powers were confined to eBay, the online auction company that purchased PayPal in 2002. But last summer, PayPal began giving a small group of developers access to its code, allowing them to work with its super-sophisticated transaction framework. Ivey immediately used it to link users’ Twitter accounts to their PayPal accounts, and his new company, Twitpay, took off. Today, the service has almost 15,000 users.
That may not sound like much, but it sends a message: Moving money, once a function managed only by the biggest companies in the world, is now a feature available to any code jockey. Ivey is just one of hundreds of engineers and entrepreneurs who are attacking the payment ecosystem, seeking out ways small and large to tear down the stronghold the banks and credit card companies have built. Square, a new company founded by Twitter cocreator Jack Dorsey, lets anyone accept physical credit card payments through a smartphone or computer by plugging in a free sugar-cube-sized device — no expensive card reader required. A startup called Obopay, which has received funding from Nokia, allows phone owners to transfer money to one another with nothing more than a PIN. Amazon.com and Google are both distributing their shopping cart technologies across the Internet, letting even the lowliest etailers process credit cards for less than the old price, cutting out middlemen, and figuring out ways to bundle payments to sidestep the credit card companies’ constant nickel-and-diming. Facebook appears to be building its own payment system for virtual goods purchased on its social network and on external sites. And last March, Apple gave iTunes developers the ability to charge subscription fees through their applications, making iTunes the gateway for an entirely new breed of transaction. When Research in Motion announced a similar initiative last fall at a session of the BlackBerry Developer Conference in San Francisco, programmers crowded the room, spilling out into the hallway. About 20 percent of all online transactions now take place over so-called alternative payment systems, according to consulting firm Javelin Strategy and Research. It expects that number to grow to nearly 30 percent in just three years.
But perhaps nobody is as ambitious as PayPal. In November, it further opened up its code, giving anyone with rudimentary programming skills access to the kind of technology and payment-industry experience that Ivey used to build Twitpay. The move could unleash a wave of innovation unlike any we’ve seen since self-publishing came to the Web. Two months after PayPal opened its platform, 15,000 developers had used it to create new payment services, sending $15 million through the company’s pipes. Software developer Big in Japan, whose ShopSavvy program lets people find an item’s cheapest price by scanning its barcode, used PayPal to add a “quick pay” button to its app. LiveOps, a call-center outsourcing firm, built a tool that streamlined payments to its operators, turning what had been a nightmare of invoicing and time-tracking into an automated process. Previously, anybody who wanted to create a service like this would have had to navigate a morass of state and federal regulations and licensing bodies. But now engineers can focus on building applications, while leaving the regulatory and risk-management issues to PayPal. “I can focus on the social side of the business and not on touching money,” as Ivey puts it.
PayPal is just the latest company to try to harness the creative powers of the open Internet. Google created a platform that lets anyone buy or display online advertisements. Facebook allows any developer to write applications for its social network, and Apple does the same with its iTunes App Store. Amazon’s Web Services provides developers the cloud-based processing power and storage space they need to build applications and services. Now PayPal has brought this same spirit of innovation and experimentation to the world of payments. Your wallet may never be the same.
Rate of Exchange One US dollar translated into various virtual currencies.* 
Social Network 
Massively Multiplayer Role-Playing Game 
Digital Marketplace
- 10 Facebook Credits >>>
- 125-170 WOW Gold (World of Warcraft) >>>
- 80 Microsoft Points >>>
- 10 Project Entropia Dollars (Entropia Universe) >>>
- 6 Q coins (QQ.com) >>>
- 250 Linden Dollars (Second Life) >>>
- 1,500,000 Star Wars Galaxies Credits >>>
- 6 Habbo Coins (Habbo Hotel) >>>
- 10 Twollars (Twitter) >>>
- 100 Nintendo points >>>
- 1,000 IMVU credits >>>
- 80 hi5 coins >>>
- 5 Farm Cash (FarmVille) >>>
- 5.71 WildCoins (WildTangent WildGames) >>>
- 2,000 Therebucks >>>
- 100 Whyville Pearls >>>
- 25,000,000 ISK (EVE Online) >>>
- 0.75 Mahalo Dollars >>>
- 4 Zealies (Dogster) >>>
- 10 Ven (Hub Culture)
* Values are approximate. Not all currencies are pegged to the dollar, and many are not intended to be exchanged for cash.
Two months after PayPal opened its platform, 15,000 developers had used it to create new payment services.
Illustration: Heads of State
The banks and credit card companies have spent 50 years building a proprietary, locked-down system that handles roughly $2 trillion in credit card transactions and another $1.3 trillion in debit card transactions every year. Until recently, vendors had little choice but to participate in this system, even though — like a medieval toll road — it is long and bumpy and full of intermediaries eager to take their cut. Take the common swipe. When a retailer initiates a transaction, the store’s point-of-sale system provider — the company that leases out the industrial-gray card reader to the merchant for a monthly fee — registers the sale price and passes the information on to the store’s bank. The bank records its fee and passes on the purchase information to the credit card company. The credit card company then takes its share, authorizes all the previous fees, and sends the information to the buyer’s bank, which routes the remaining balance back to the store. All in all, it takes between 24 and 72 hours for the vendor to get any money, and along the way up to 3.5 percent of the sale has been siphoned away.
In the earliest days of credit cards, those fees paid for an important service. Until the late 1950s, each card was usually tied to a single bank or merchant, limiting its usefulness and resulting in a walletload of unique cards. But when BankAmericard — later renamed Visa — offered to split its fees with other banks, those banks began to offer Visa cards to their customers, and merchants began accepting Visa as a way to drive sales. Meanwhile, Visa and rival MasterCard — as well as distant competitors American Express and Discover — used their share of the fees to build their own global technological infrastructures, pipes that connected all the various banks and businesses to ensure speedy data transmission. For its time, it was a technologically impressive system that, for a price, brought ease and convenience to millions of buyers and sellers.
For the Full Article Click The Link Below Sourrce:Wired
The Future of Money: It’s Flexible, Frictionless and (Almost) Free | Magazine.
Debate: the future of exchanges & banks – analysis review – companies – FT.com
>Debate: the future of exchanges & banks – analysis review – companies – FT.com: “Debate: the future of exchanges & banks”
Spacetime Singularity 