GE CEO Jeffrey Immelt said the company has paid lower taxes over the past few years than what a company would typically pay mainly because of $32 billion in losses suffered by its GE Capital unit after the U.S. financial crisis of 2008.
He said GE’s taxes are expected to increase in 2011 as the company continues to recover and rebuild its profits, Market Watch reported.
The nation’s sixth-largest company has drawn sharp criticism after a New York Times article on how GE manages to reduce taxes — in 2010, it received a $3.2 billion benefit — often by lobbying Congress for special tax breaks.
The company has disputed many of the claims in the article and said it’s fully in compliance with U.S. law.
“Like any American, we do like our taxes low,” Immelt said.
Immelt offered a defense of his company during a speech at the Economic Club of Washington to outline how the U.S. can improve its economy and raise job growth. Earlier this year Barack Obama appointed Immelt to head the president’s Council on Jobs and Competitiveness, a somewhat controversial decision given the company’s extensive business with the federal government.
One way to achieve higher job growth, Immelt said, is to reform the domestic tax system like many other nations around the world are doing. He said the U.S. code increasingly discourages the creation of new businesses and investment.
“Our system is old, complex and uncompetitive,” said Immelt, reflecting the view of most American CEOs. He said he was willing as a chief executive to support reforms that would lower the corporate tax rate while eliminating unspecified loopholes or business tax breaks.
Immelt also said the federal government has to do a better job of getting rid of old and outdated regulations and not just pile new rules onto an already-creaky system of oversight.
Another goal of the jobs council, Immelt said, is to find ways to help small businesses grow. He said the creation of new small businesses after the 2007-2009 downturn is 23% lower than is typically the case following a recession.
Most of the ideas the council comes up with are unlikely to require any congressional legislation, he stressed. The one exception is trade. Immelt said lawmakers should act quickly to pass three pending free-trade deals with Panama, Colombia and South Korea.
“The rest of the world is signing free-trade agreements today as we speak,” he said.
In somewhat of a surprise, Immelt also declared companies are less likely to focus on countries with the lowest wages when deciding where to put a business.
Advances in technology and other factors have made it easier for companies to reduce costs wherever they go. As one example, Immelt said it only costs GE 10% more to operate a call center in the U.S. compared to India, where wages are much lower.
The company is also moving more manufacturing jobs in its appliance business back to the U.S. and plans to create 16,000 jobs at home over the next few years.
“I think the era of globalization around cheap labor is over,” he said.
What’s likely to become an even bigger factor in the future is the educational level of a nation’s workers. Like many business leaders, Immelt said the U.S. has to improve its education system, especially for math and science.
“We have more degrees in sports therapy than electric engineering,” Immelt said.