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| UPDATED: 2006-06-29 |
 Symantec, IRS In Billion Dollar Battle 
By: David Utter 2006-06-29 The Internal Revenue Service hit Symantec with a massive tax bill in April due to alleged underreporting of the value of transfers of intellectual property to subsidiaries in Ireland.  In case you were wondering just what I mean when I mention "The Fear" in certain stories, this account of Symantec (SYMC) and its April 2006 tax nightmare should define the term quite nicely.
The two companies each had set up subsidiaries in Ireland. Favorable tax laws in the country have made it a desirable destination for high-tech companies. Each business transferred certain intellectual property to its Irish subsidiary. As the Wall Street Journal reported, an IRS audit contended some financial shenanigans took place, an assertion Symantec denied in a petition to the US Tax Court: The IRS contends that licensing fees paid by the Irish subsidiary to Veritas in the U.S. were too low and that Veritas credited the U.S. business with too much of the cost of developing certain technology, according to the petition. Both of those had the effect of increasing the income of Veritas's subsidiary in Ireland at the expense of income in the U.S., consequently lowering the U.S. tax bills paid by the company in 2000 and 2001.
The IRS wants Symantec to pay the extra taxes Veritas owes now: $757 million, plus $303 million in penalties, the Journal said. Symantec referred to the allocations defined by the IRS as "arbitrary, capricious, and unreasonable," a description millions of Americans likely also attribute to the federal tax-gathering agency. These transfer pricing arrangements have proven a headache for the IRS. The report noted how IRS Commissioner Mark Everson said they have "significant compliance problems" with transfer pricing. That statement and the Symantec case could be construed to mean the IRS will take steps to crack down on such abuses by other companies. And that proposition is what The Fear is all about. --- Tag: Symantec Add to  Del.icio.us |  Digg |  Yahoo! My Web |  Furl
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View All Articles by David Utter About the Author: David Utter is a staff writer for InternetFinancialNews and WebProNews covering technology and business. |
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