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Google plans to litigate U.S. tax dispute with IRS

A neon Google logo is seen as employees work at the new Google office in Toronto, November 13, 2012. REUTERS/Mark Blinch
A neon Google logo is seen as employees work at the new Google office in Toronto, November 13, 2012. REUTERS/Mark Blinch

WASHINGTON (Reuters) - Google Inc, which consumer groups have accused of trying to avoid payment of U.S. taxes, plans to sue the Internal Revenue Service over a tax audit, according to a federal securities filing.

The web search giant said it is appealing an IRS audit related to 2003 and 2004, but that on one undescribed issue, it plans to "litigate in court," said its annual filing with the Securities and Exchange Commission, dated January 29.

A company spokeswoman was not available for comment.

Groups such as Citizens for Tax Justice accuse Google of using accounting gimmicks and paper transactions to shift profits to tax havens to avoid U.S. tax.

Google also said its tax rate for the United States declined in 2012, in part because of "proportionately more earnings realized in countries that have lower statutory tax rates."

Its effective tax rate fell to 19.4 percent in 2012, from 21 percent in 2011, according to the filing.

The United States has the highest statutory corporate income tax rate among its industrialized peers at 35 percent. Many companies say this hurts their competitiveness.

The tax rate paid, however, is highly variable across sectors, and tech companies in particular enjoy numerous options for transferring profits offshore to tax havens to avert tax.

President Barack Obama and Republicans both back lowering the corporate rate, though they differ on how to get there and whether new revenue should be raised in the process.

Several European countries are taking an aggressive stance on corporate tax avoidance, most notably the United Kingdom.

(Reporting by Kim Dixon; Editing by Kevin Drawbaugh and Steve Orlofsky)

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