Google spending billions to avoid tax bill

By on May 26, 2014

The tech giant is expected to spend around R310 billion buying foreign companies so it doesn’t have to pay tax. It seems Google really doesn’t want to lose 35 percent of its cash mountain by moving it back to the States.

Google could soon be getting very busy buying up companies outside the US, having stocked up a mega R310 billion war chest that it would really rather not bring back to the US.

The search giant wrote to the US Securities and Exchange Commission (SEC) in December to explain why it was keeping so much cash abroad. The short answer is avoiding the 35 percent tax on money US companies bring back from overseas. The long answer is that Google wants to put that mountain of dosh to work by snapping up companies.

“It is reasonable to forecast that Google needs between R200 billion to R300 billion of foreign earnings to fund potential acquisitions,” the third-person loving company wrote in the letter, which was only made public this week.

It adds this was because “our global business has expanded into other product offerings like mobile devices” – ironic, given it sold off Motorola to Lenovo just a few weeks later.

Google revealed it had tried and failed to buy a foreign company for around R45 billion last year. It didn’t name the one that got away, but mentioned it to illustrate the size of target it was after. A deal that size would far eclipse its largest foreign deal to date – the R10 billion it paid for Israeli mapping business Waze.

The company also mentioned it hoped to eventually put ads “on refrigerators, car dashboards, thermostats, glasses, and watches, to name just a few possibilities”. That was before it paid out R33 billion for connected home gadgets maker Nest, whose users it assured it would ask permission to use their data. Google claimed that the terrifyingly ubiquitous idea for ads now “does not reflect our product roadmap”.

What is likely is the California-based company will be after more hardware businesses, given there aren’t many large internet companies left to poach outside the US. It could also set off an M&A frenzy, as it is far from the only tech giant with a big pile of cash sat doing nowt.

You must be logged in to post a comment Login

Leave a Reply