The search engine giant, if Intel wins against the IRS, would make a lot of money.
If Intel Corporation wins the international tax dispute against the Internal Revenue Service, Alphabet Inc. Google’s parent company, could an amount which exceeds its total tax cost for 2015. The search engine giant is likely to gain as much as $3.5 billion in tax benefits.
This dispute between the two, Intel Corporation and Internal Revenue Service has been going on for as long as 13 years. However IRS has been in a constant struggle as well with all the technology companies in the industry over low-taxed subsidiaries that these tech organizations have aboard along with cost-sharing arrangement that they have amongst themselves.
Last week the IRS appealed to the Ninth U.S Circuit Court of Appeals regarding the share-based compensations; a number of technology giants have been following this case very closely which includes over 20 companies in addition of Microsoft Corporation along with eBay Inc. These companies have informed that they are monitoring the case quite closely but they cannot enumerate any potential benefits that could come from this case, mainly because at this point it is still quite uncertain whose favor the case will be on.
In case Intel Corporation succeeds the technology giant who will get the biggest benefit will be Alphabet Inc. as in its annual report it mentioned a potential benefit of over $3.5 billion as per a lower court’s ruling. It would get a huge one-time boost to its earnings if this actually happens. The search engine organization stated that it is yet to decide how it will be using this money or if it even will take all the money – however it is planning that, in case Intel wins, it might put the gain in its offshore subsidiaries.
Presently, all three Intel, Alphabet as well as IRS have declined to comment on the matter. A law professor at the University of Michigan, Reuven AviYonah has stated that if Google will be gaining $3.5 billion, there is a possibility that there are a number of other such companies that would have millions of dollars at stake as well. In case Intel prevails, the future benefits that a number of companies can get have not been calculated as well.
The whole point of this ongoing saga is that the companies in the United States do not bring home the money that they make aboard due to which that money is not taxed until they are brought to the country. Instead, this money is kept abroad at the subsidiaries and hence incurring low tax and further they are to pay the employees in the United States since they are the ones are working on and making the products that are sold abroad. This results in lower income in the United States along with lower taxes at a rate of 35%. While the money made in the low taxed countries is charged on a much lower tax rate.