Google Inc (GOOG) Slapped with $5 Billion Fine?

Page 1 of 2

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.

Google Inc (GOOG)

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%
Google 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?

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!