Google Has Much at Stake in Intel Tax Case
June 3, 2016
In the exciting department of tax activities, 9to5Google reports, “Google Could Effectively Recoup All the Tax it Paid Last Year if Intel Wins Test Case.” Why is Google so invested in a dispute between Intel and the IRS? Writer Ben Lovejoy explains:
“In essence, the case hinges on share compensation packages paid by overseas subsidiaries. The IRS says that the cost of these should be offset against the expenses of the overseas companies; Intel says no, the cost should be deducted by the U.S. parent company – reducing its tax liabilities in its home country. The IRS introduced the rule in 2003. Companies like Google have abided by the rule but reserved the right to reallocate costs if a court ruling went against the IRS, giving them a huge potential windfall.”
This windfall could amount to $3.5 billion for Alphabet, now technically Google’s “parent” company (but really just a reorganized Google). Apparently, according to the Wall Street Journal, at least 20 tech companies, including Microsoft and eBay, are watching this case very closely.
Google is known for paying the fewest taxes it thinks it can get away with, a practice very unpopular with some. We’re reminded:
“Google has recently come under fire for its tax arrangements in Europe, a $185M back-tax deal in the UK being described as ‘disproportionately small’ and possibly illegal. France is currently seeking to claim $1.76B from the company in back taxes.”
So, how much will the world’s tax collectors be able to carve out of the Google revenue pie? I suspect it will vary from year to year, and will keep courts and lawyers around the world very busy.
Cynthia Murrell, June 3, 2016