Feeds

Twitter, Facebook and pals keep BEELLIONS from treasury with exec pay tax break – report

Stock option loophole helps 12 tech firms legally dodge $4bn, say activists

Top three mobile application threats

Twitter, Facebook, LinkedIn and other tech firms will shelter billions of dollars in profits from taxation with the executive stock options they have planned for the next few years.

According to Citizens for Tax Justice, an activist research group, annual reports from companies like Zynga, Salesforce and Rackspace along with IPO filings from Twitter show that 12 tech firms could eliminate all taxes on the next $11.4bn they earn, giving them $4bn in tax cuts.

Because a lot of tech firms go public when they're not profitable yet, the stock options roll over into future years, giving the companies a backlog of tax breaks to use.

Stock options reduce tax by paying executives with an option to buy shares in the company at a favourable price at a set time in the future, rather than giving them wages in cash. When the options are "exercised" (the employee buys the shares), the company takes a tax deduction for the difference between the amount the employee pays for the stock and what it's actually worth. Employees do report the difference as taxable wages, so governments get some tax from the staffers' wage packets, but the stock option break can significantly reduce corporate tax payments.

The CTJ said that in the case of Amazon, income taxes had been cut by $750m in the US between 2010 and 2012. The etailing behemoth had an effective tax rate over these three years of 9.4 per cent when all its breaks were factored in. In CTJ's calculations, without the stock options break, Amazon's rate would have been 40.4 per cent.

"Allowing companies to deduct 'expenses' they never actually paid, as the current stock option rules do, means that profitable companies rewarding their executives with lavish stock options have a simple strategy for avoiding their income tax liability," the group said.

"Paring back the tax break… or eliminating it entirely, would help make the corporate tax fairer and more sustainable in the long run."

Although it hasn't even débuted on the market yet, Twitter already has $107m of unused stock option deductions, while Facebook still has $2.17bn in unused tax breaks, even after claiming a massive $1bn of the breaks last year.

The CTJ said some companies don't even put the cumulative amount of unused stock option deductions they forecast they'll have in the future into their annual financial reports, so it's difficult to know how much tax they'll be able to avoid. ®

Application security programs and practises

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
Microsoft: We're making ONE TRUE WINDOWS to rule us all
Enterprise, Windows still power firm's shaky money-maker
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.