The New York Times ran a lengthy expose of GE's offshoring of profits and other tax avoidance techniques. David Kocienieski, GE's Strategies Let It Avoid Taxes Altogether, NY Times, Mar. 24, 2011. Don't miss the great "interactive media" link: General Electric: Where Taxes are a Source of Profits.
US companies are supposed to pay a tax of 35% on their worldwide profits. But there are lots of loopholes (some intended, some not) and many of those have been expanded over the last 20 years, as Congress races to satisfy the corporate lobbyists. After the 2001 tax cut bill, Congress basically promised the corporate lobbyists they'd get their wish list. And they did. The 2003 and 2004 bills weakened the way the foreign tax credit works, so that multinationals can use high taxes paid in one country to offset low taxes paid in another and avoid paying US taxes even on that low-taxed income. It gave them the 15% rate on dividends, so that the wealthy elite who own most of the capital assets now get preferential rates on their regular streams of income (15% on dividends, 0% on muni-bond interest) as well as low 15% rate on their sales of stock and other securities. There were lots of goodies from the corporate lobbyists' wish lists that got passed--expensing, shorter lives for depreciation, that special rate reduction for "manufacturers" (that ends up covering the oil and gas industry) that was passed when the WTO made us stop a discriminatory tax provision that favored US industry, the R&D credit, the "active financing" exception to subpart F, and on and on.
Companies like GE, that hire lots of well-trained tax attorneys and make cutting taxes a big piece of how their businesses work, have made hay out of the laxer code. They talk a lot about how that 35% statutory rate is just killing them. But meantime they make huge profits and pay zero taxes. That's just one facet of corporatism that is damaging ordinary Americans today.
Read the New York Times story first. But then watch this March 28, 2011 Jon Stewart take on the GE tax avoidance success story.