Feeds

IBM nearly HALVES its effective tax rate in 2013 - report

Big Blue reportedly benefits from shuffling profits through Dutch subsidiary

3 Big data security analytics techniques

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
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
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
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
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.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.