Life is good for Google Inc (NASDAQ:GOOG). Google Inc (NASDAQ:GOOG)’s stock soared in 2013, up 22% from the first of the year. But all this success has attracted the attention of both competitors and the tax man. With a $5 billion fine threatened in an antitrust acquisition and the European Union calling for millions in tax hikes, let’s see if Google Inc (NASDAQ:GOOG)’s days of glory are numbered.
Antitrust lawsuit
Google’s strength has once again brought brewing storms to the company’s doorstep. First, competitors Microsoft Corporation (NASDAQ:MSFT) and Nokia Corporation (ADR) (NYSE:NOK) are more than willing to bring accusations against Google. This isn’t the first time these companies have chased the competition. Microsoft sued Barnes & Noble in 2011 and Motorola in 2012 over patent issues, while Nokia Corporation (ADR) (NYSE:NOK) brought lawsuits against mobile phone seller HTC in 2013. These attempts to maintain market share have united the two in a fight against Google. Complaining about the unfair ranking of search results, the Microsoft Corporation (NASDAQ:MSFT) group that filed the complaints stated
Google should implement the same ranking policy to all websites. This should include their own vertical services, which currently have their ranking unfairly manipulated to appear at or near the top of search results.
These complaints brought about the creation of a focus group to lead the probe into Google’s business practices. Google responded by providing proposed tweaks to how its search results are displayed. The situation will be reviewed by the antitrust committee. But here is the important part: the proposed fine is 10% of Google Inc (NASDAQ:GOOG)’s annual revenue, which would amount to $5 billion.
The tax man wants his share
A group of the European Union is also investigating the loopholes and tax shelters that Google has employed in recent years to pay significantly lower taxes. As Google noted in its quarterly earnings report, its company-wide effective tax rate is right around 8%, a staggeringly low number for such a large business. Google Inc (NASDAQ:GOOG), however, is not alone in the European Union’s investigation.
The EU is targeting both Amazon.com, Inc. (NASDAQ:AMZN) and Starbucks Corporation (NASDAQ:SBUX) as well. All three have large international bases and are taking a beating in the news. Amazon is being investigated for shielding its tax payments through intricate inter-company payments, while Starbucks Corporation (NASDAQ:SBUX) has attempted to capitalize on every tax break possible. Take a quick look at the effective tax rates for these five companies. Microsoft Corporation (NASDAQ:MSFT) and Nokia Corporation (ADR) (NYSE:NOK) have good reason to be envious of the tax rate that Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) enjoy.
| Company-wide effective tax rates | |
|---|---|
| Amazon | 6% |
| 8% | |
| Starbucks | 28% |
| Nokia | 25% |
| Microsoft | 22% |
Enough to push the stock south?
Will this hullabaloo have enough of an effect to push Google’s stock south? I don’t believe so. Even amidst this turmoil, Google continues to build its business. Google invested $291 million into acquisitions in 2013, posted staggering first quarter earnings, and is even looking to develop wireless networks in several emerging markets. How is that for strength?
