“The U.S. Internal Revenue Service is auditing how Google Inc. avoided federal income taxes by shifting profit into offshore subsidiaries, according to a person with knowledge of the matter,” Jesse Drucker reports for Bloomberg.
“The agency is bringing more than typical scrutiny to how the company valued software rights and other intellectual property it licensed abroad, said the person, who requested anonymity because the audit isn’t public,” Drucker reports. “The IRS has requested information from Google about its offshore deals after three acquisitions, including its $1.65 billion purchase of YouTube, the person said.”
Drucker reports, “The transfer overseas of these kinds of rights has enabled Google to attribute earnings to foreign units that pay lower taxes, Bloomberg News reported a year ago… Google, owner of the world’s most popular search engine, has cut its worldwide tax bill by about $1 billion a year using a pair of strategies called the “Double Irish” and “Dutch Sandwich,” which move profits through units in Ireland, the Netherlands and Bermuda. Google reported an effective tax rate of 18.8 percent in the second quarter, less than half the average combined U.S. and state statutory rate of 39.2 percent.”
“U.S. companies are sitting on at least $1.375 trillion in earnings in their foreign subsidiaries on which they have paid no federal income taxes, according to a May report by JPMorgan Chase & Co.,” Drucker reports. “Companies including Google, Cisco Systems Inc., Pfizer Inc., Apple Inc. and Microsoft Corp. are lobbying Congress for a tax holiday on bringing home those profits, which would otherwise be subject to U.S. income tax at the 35 percent corporate rate with a credit for foreign taxes already paid.”
Much more in the full article here.
[Thanks to MacDailyNews Readers “Fred Mertz” and “Edward Weber” for the heads up.]
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