US multinational General Electric has announced an 18% jump in its net earnings, a high proportion of which has been attributed to a large fall in the amount of tax the firm expects to pay, the Financial Times has reported.
GE, the world’s largest firm by market value, made a total provision of $677m for income taxes for the fourth quarter of 2004, a figure equal to just over 11% of its $6.06 billion pre-tax earnings, while the effective tax rate paid on the profits of the firm’s financial services business was even lower at 3%.
The effective tax rate for GE's industrial business fell to 16.7%, although it was reported that the firm expects this to climb back to around 25% this year.
Much of the reduced tax bill has been put down to the tax breaks passed as part of the American Jobs Creation Act, particularly changes to tax rules concerning aircraft leasing. Analysts also point to the sale of GE's outsourcing business in India, which produced a gain of $336 million.
The company itself has stated that its effective tax rate is falling due to an increase in business being conducted overseas, often in low-tax jurisdictions.
Full-year 2004 earnings were $16.6 billion, up 6% from 2003 earnings before required accounting changes. Cash flow from GE's operating activities (CFOA) in 2004 increased 18% to $15.2 billion.
"GE had a tremendous fourth quarter and an excellent 2004, as we completed our strategic repositioning and returned to double-digit earnings growth in the quarter," announced GE Chairman and CEO Jeff Immelt.
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