US IRS Auditing Google, Looking for Probable Tax Evasion Techniques

Internal Revenue Services of U.S. is doing “more than typical scrutiny” over an audit of Google on how the company has valued software rights and other intellectual property it has licensed abroad, reported Bloomberg.

By citing “a person with knowledge of the matter”, Bloomberg said the IRS audit is investigating how Google may have avoided federal income taxes by shifting their profit into offshore subsidiaries.

Google officially has not made any comment except that spokesman Jim Prosser said to Bloomberg that the audit “is a routine inquiry.”

Tax attorneys of Google are in frequent contact with the IRS like any other multinational company and audits are quite common.

The agency is looking into the information about the offshore deals related to three Google acquisitions Bloomberg writes. The three acquisitions include acquisition of YouTube in 2006 for $ 1.65 billion.

The report also says that IRS is looking into the prices Google’s foreign subsidiaries paid for various software and intellectual property rights in the acquisition of e-mail security service Postini in 2007 for $625 million and the purchase of Web-advertising firm DoubleClick in 2008 for $3.2 billion.

By attributing earnings to foreign units that pay lower taxes Google can actually evade paying huge amount of money to the IRS.