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
blog comments powered by Disqus
Insider Monkey Headlines
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

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

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!