Disturbing revelations from investigative reporter and tax expert David Cay Johnston on GE's Brazilian tax schemes.

All the details are revealed in his piece Blame It on Rio: GE's Brazilian Headache"In 2005 the new manager of a General Electric subsidiary in Brazil that made light bulbs and lighting equipment got a tip, the company says. It led to his discovering something curious in the company's records: Up to 64 percent of annual sales were recorded as going to wholesale distributors in lightly populated regions near the Amazon River.

"Valter Moreira, the manager, noted in a report to his GE bosses in America that half of Brazilians live in urban states like São Paulo and Rio de Janeiro. So why would so many sales be made, at least on paper, to areas where few people lived?

"Moreira's report explained that urban Brazilian states charged the subsidiary a 19 percent VAT on its bulbs, switches, and fixtures, while the rural states charged just 7 percent or none at all.

"In his PowerPoint presentation to GE executives in the United States, Moreira analyzed sales patterns by vendor and supposed location of the sale. His report cited "suspicious" invoices as "an indication of possible tax evasion" that saved GE either 12 cents or 19 cents on each dollar of sales.

"On $100 million of sales, that would be an extra $12 million to $19 million the company could use for all sorts of things, from lowering prices to gain market share, to funneling money to anyone from a corrupt purchasing agent to cronies of powerful politicians, or inflating the pay of its executives and sales agents. All of these issues would come up internally in the months ahead, but would not be disclosed to American or Brazilian authorities or GE shareholders."

The report tells us how GE evaded tens of millions of dollars in Brazilian payroll taxes on compensation to the sales force, which did business in other latin american countries as well.

Clearly, GE was running the risk of serious legal problems. And if that is done over several years, questions would have to be asked whether GE shareholders were informed.