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

Beginner's guide to SSL certificates

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. ®

The next step in data security

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Murdoch to Europe: Inflict MORE PAIN on Google, please
'Platform for piracy' must be punished, or it'll kill us in FIVE YEARS
Bono: Apple will sort out monetising music where the labels failed
Remastered so hard it would be difficult or impossible to master it again
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.