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CORRUPTION'S MANY FORMS

Living in Brazil, one hears endless talk of corruption and cronyism at every level of government and public institutions. Usually it's about money passing hands in order to "buy"  outcomes that should not be bought.

But I've always thought that there's another kind of corruption as when money payments are NOT made for outcomes that should be paid for. This is often the case under the "welfare-for-corporations" tax schemes that are common in the United States.

According to the New York Times, G.E.’s Strategies Let It Avoid Taxes Altogether...

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.

....

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. (continue to full article at the NY Times)

Interestingly, Brazil may be among the major beneficiaries of the "money remaining overseas" with the announcement of The newest GE Global Research location in Rio de Janeiro, Brazil.

On Wednesday, February 16, 2011, GE’s top executives met president Dilma Roussef to announce the location of the 5th and newest GE Global Research location in Rio de Janeiro, Brazil. Over the next three years $100 million will be invested into the center to become a 200-employee research and development lab focused on advanced technologies for the oil and gas industry, renewable energy, aviation, rail, and mining.

New GE Research Center for Rio de Janeiro
 
GE is surely not unique in trying to grab a place in Brazil's spectacular economic growth. While the forms of corruption may differ from country to country and culture to culture, one thing is in common. The eyes of global investment are focused on Brazil which seems destined to soon become the world's fifth largest economy. And whether corruption is good or bad depends a lot on where you stand.