STOCK MARKET WATCH -- Tuesday, 4 February 2014

[antigop]

35. IBM Uses Dutch Tax Haven to Boost Profits as Sales Slide

http://www.bloomberg.com/news/2014-02-03/ibm-uses-dutch-tax-haven-to-boost-profits-as-sales-slide.html

International Business Machines Corp. (IBM) has reduced its tax rate to a two-decade low with help from a tax strategy that sends profits through a Dutch subsidiary.

The approach, which involves routing almost all sales in Europe, the Middle East, Africa, Asia and some of the Americas through the Netherlands unit, helped IBM as it gradually reduced its tax rate over 20 years at the same time pretax income quadrupled. Then last year, the rate slid to the lowest level since at least 1994, lifting earnings above analysts’ estimates.

IBM is aiming for $20 a share in adjusted earnings by 2015, up from $11.67 in 2010 -- a goal made more difficult as the company posted seven straight quarters of declining revenue. To stay on target, IBM has bought back shares, sold assets, and fired and furloughed workers. A less prominent though vital role is played by its subsidiary in the Netherlands, one of the most important havens for multinational companies looking for ways to legally reduce their tax rates.
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Attracted by the Netherlands’ policies and extensive network of tax treaties, IBM joins companies such as Yahoo! Inc., Google Inc. and Cisco Systems Inc. that have used Dutch subsidiaries to cut taxes.

Offshore tax strategies like the one used by IBM are coming under increased scrutiny. In the past year, the tax-avoidance techniques of companies including Apple Inc., Google and Amazon.com Inc. have been the subject of U.S. Senate and U.K. Parliament hearings. Meanwhile, the Organization for Economic Cooperation and Development, a government-funded think tank, is developing a plan to fight so-called profit-shifting at the direction of the Group of 20 nations.