You’ve probably heard this by now. General Electric (GE) is paying no taxes in the US despite more than $10 billion in profits for the accounting year 2010! How can this be!? I’s earning a fraction (a tiny, little, minute fraction of the $10 billion to be clear) and I’m paying taxes!!
US corporations are usually taxed around 35% of the income! US GAAP indicates a 40% tax rate. Whats going here? The GE chief Immelt spoke recently and defended the position. He said
“At GE, we do like to keep our tax rate low, but we do it in a compliant way, and there are no exceptions,”
How could a company be a 100% compliant, have income and still pay no taxes! Well there could be many reasons for a situation like this to occur. In the case of GE, a company that has operations in 100s of countries with various operating entities, it reports profits for each country and entity separately. It so happens that it made no profits in the US while its international business was profitable. And since it was not repatriating its profits back to the US this year (parking profits overseas) it did not have to pay taxes in the US!
There could be other reasons too for this situation arise. Lets look at one more situation as an example. A company may have profits and taxes due in a year but because prior year’s tax assets offset the taxes due, it could end up not paying any taxes.
A few weeks ago we wrote a post titled “The Importance of Accounting for Investors“. We believe that accounting is important for many professions and not just accountants. What about computer scientists or programmers!? The tech world seems very far away from the world of accounting! But we think that accounting is important for computer scientists and programmers too. (call us biased if you will 🙂 Accounting is important for for computer scientists and programmers.
But don’t take our word for this. Martin Kleppmann is an entrepreneur and software ‘craftsman’. He is a co founder of Rapportive and entrepreneur who has sold his former company (Go Test). Here is what Martin had to say in a recent post.
Every educated person really ought to have a basic understanding of accounting. Just like maths, science, programming, music, literature, history, etc., it’s one of those things which helps you make sense of the world. Although dealing with money is not much fun, it’s an unavoidable part of life, so you might as well take a few minutes to understand it.
We completely agree with his observation! He is not all kind to the accountants of the world. He continues…
Sadly, in my opinion, most accountants do a terrible job of explaining their work in an accessible way; it’s a field full of jargon, acronyms and weird historical legacies. Even “Bookkeeping for Dummies” makes my head spin. Surely this stuff can’t be that difficult?
Well, we still agree. Accounting cant be that difficult! We think it hasn’t been taught that well – thats it. At accountingtutor.org, we take students whose ‘heads spin’ and help them make sense of accounting. We believe that if accounting is taught step by step in the right manner, its really simple. Every one should get it. Accounting is not that difficult and accounting for programmers is not any different.
Read Martin’s post above. He tries to explain it in programming language. We are accountants and not programmers so we don’t really get it. But we have developed our own ways to teach you accounting. Try us and let us help you learn accounting. Special welcome to computer scientists or programmers.