Feeds

IBM nearly HALVES its effective tax rate in 2013 - report

Big Blue reportedly benefits from shuffling profits through Dutch subsidiary

High performance access to file storage

IBM has managed to legally reduce its tax payouts by billions of dollars after sending its profits through a Netherlands subsidiary that acts as a holding company for more than 40 of its firms worldwide, according to Bloomberg.

At the end of 2012 IBM had accumulated $44.4bn of offshore profits on which it hadn't paid US taxes, the sixth-highest total of any American company, according to data compiled by Bloomberg from its securities filings.

In its results for the end of 2013, released last month, IBM listed its effective tax rate as 15.6 per cent, down from 24.2 per cent in 2012, giving the firm a tax provision $1.84bn lower than it had initially budgeted for.

The company said in an October filing that its tax rate was lower than it had forecast because of a "more favourable expected geographic mix" of revenue, but it didn't give any further details.

In its fourth quarter results, the firm said that its effective tax rate was 11.2 per cent, down from 25.5 per cent in 2012, "due to discrete period tax items, including benefits from tax audit settlements".

IBM declined to comment on its tax structure when contacted by The Reg.

According to Bloomberg, IBM International Group, Big Blue's Dutch holding company, takes in earnings from more than 40 IBM-owned firms around the world, including its operations in Ireland. The Dutch firm has a list of around 205,000 employees, nearly half of IBM's global workforce, but only two per cent of them actually work in the Netherlands.

Using subsidiaries in low tax havens like Ireland and the Netherlands to legally process profits from other countries has become common practice for large multinationals, but the arrangement has started to receive more scrutiny in the past year or so as authorities wonder if these legal loopholes are letting too many tax dollars through.

Companies including Google and Apple have been called in front of Parliament in the UK and the Senate in the US to answer questions about their tax avoidance techniques, while the G20 and the OECD are working on a plan to revamp international tax laws and close off these loopholes.

The technique typically works by having the subsidiary in the low tax region hang on to intellectual property rights and business-critical materials. Business in higher tax countries post few or no profits, having used their earnings to license their IP rights and buy their materials from their own subsidiary.

Since only profits are taxed, a global business can end up with a low effective tax rate courtesy of its subsidiary in the tax haven, despite operating companies in a wide number of tax jurisdictions. ®

High performance access to file storage

More from The Register

next story
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Nokia offers 'voluntary retirement' to 6,000+ Indian employees
India's 'predictability and stability' cited as mobe-maker's tax payment deadline nears
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
France bans managers from contacting workers outside business hours
«Email? Mais non ... il est plus tard que six heures du soir!»
Adrian Mole author Sue Townsend dies at 68
RIP Blighty's best-selling author of the 1980s
Analysts: Bright future for smartphones, tablets, wearables
There's plenty of good money to be made if you stay out of the PC market
prev story

Whitepapers

Mainstay ROI - Does application security pay?
In this whitepaper learn how you and your enterprise might benefit from better software security.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.