IBM -
the
IT services company, under pressure to meet a high earnings forecast,
has turned to the ever-malleable tax code for a boost to its earnings.
That has some pretty surprising consequences, as Alex Barinka and Jesse Drucker report for
Bloomberg: The company is driving more income through a subsidiary in
the Netherlands. In 2008, the subsidiary, IBM International Group BV,
reported just three employees, but at the end of 2012, it reported
205,000—almost half of the company’s worldwide staff of 430,000 workers.
Of
course, we’d be hearing about a Dutch property bubble if those 205,000
people actually lived in the Netherlands. In fact, just 2% of them do.
The rest are scattered around the world. For tax purposes, measures like
these saved the company $6.5 billion from 2010 to 2012.
In 2013, the
company paid a 15.6% overall global tax rate, which it attributed to a
“more favorable [than] expected geographic mix” of revenues (auditor
jokes are funny). That will have added to the $44 billion of untaxed
cash the company had accumulated overseas by the end of 2012, though we
don’t yet know by how much.
Public-policy
concerns aside, what worries analysts, of course, is a company on a
cost-cutting mission running out of costs to cut. When it’s doing so
much of that through tax avoidance, it inevitably raises questions about
how well the primary business is going.
Read more: IBM saved its earnings by moving almost half its employees to the Netherlands - Quartz
