TEHRAN, November 06 - General Electric Co on Monday downplayed concerns that its U.S. tax liabilities could increase by billions of dollars and that a decision by British tax authorities could saddle the company with an additional $1 billion tax bill.
TEHRAN, Young Journalists Club (YJC) -General Electric Co on Monday downplayed concerns that its U.S. tax liabilities could increase by billions of dollars and that a decision by British tax authorities could saddle the company with an additional $1 billion tax bill.
“Based on current law and guidance, we believe our current accrual is a reasonable estimate for the enactment of tax reform,” Todd Ernst, GE’s vice president of investor communications, said in an unusually detailed email to investors on Monday, referring to the U.S. Tax Cuts and Jobs Act of 2017, the bill passed by Congress that significantly reduced corporate tax rates.
Ernst said GE had disclosed the risk of $1 billion in additional British tax with third-quarter earnings, but considers it unlikely. “We expect to successfully contest the assessment, if made, and not owe any additional taxes to the U.K.,” Ernst said.
The payments would come after GE reported a $22.8 billion quarterly loss last week, and has seen its cash income plummet as it has taken more than $40 billion in writedowns and charges in less than a year from its power division, long-term care insurance portfolio, the tax law and other issues.
Ernst’s comments came after analyst John Inch at research firm Gordon Haskett, said years of booking “inexplicably low tax rates” could land GE with billions of dollars of additional cash tax payments in the United States.
GE likely owed up to $9 billion in taxes under the 2017 corporate tax cuts, but took only a $3.3 billion charge while saying “offsets” would reduce cash tax costs in the future.
“The taxman knocks,” said Inch in the note, published on Friday. “If even some of these ‘offsets’ are disallowed the company could wind up owing a large tax bill near term.”
Inch also said GE’s on-balance sheet and off-balance sheet liabilities could exceed $100 billion. Paying would be difficult as GE is trying to turn around troubled businesses.
Ernst said GE expects U.S. tax authorities to provide more clarity, possibly in the fourth quarter, and GE would then disclose an “increase or decrease in liability.”
Source: Reuters
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