Googles Tax Problem; Uncle Sams Opportunity; Thank You Europe $GOOG, $YHOO, $FB, $TWIT

Google (Nasdaq:GOOG) is being hunted down by european tax collectors controlled by austerity starved politicians. Google and other American companies are seen as fat cows. Minimal local political consequences to extracting a few pounds of flesh.

Google rolls up the revenues to Google Ireland and then shunts the cash off to an affiliate in Bermuda. Pretty clever except UK, France and Germany feel they are not getting their fair share.

Come back to USA. Huge amounts of corporate cash are parked off shore. Corporations do not want to pay US income taxes on funds earned elsewhere. Not a bad argument if local taxes had been paid. But if the funds are in Bermuda and Ireland no one has paid something substantial.

So far the argument has been a classic push. Competing governments have not been able to break the logjam. Several corporations have huge off shore cash reserves with no immediate plans to deploy.

US politicians are under increasing pressure to resolve the issue. The uninformed electorate sees big buck off shore held by uber-large entities and joins the local Occupy Wall Street movement. End of electorates analysis. One person one vote does not equal sound financial/economic thought.

Corporations to be frank are motivated by stupid tax rules. Most of the key executives are  domiciled in the US and would probably prefer to see capital returned to US and then move globally without restrictions.

Congress will most likely mandate local state taxes be paid on internet transactions. Politicians also would love to be able to say they forced the repatriation of billions from overseas back to US. This will appease the Occupy crowds.

Watch for tax treaties between  the US and major European governments (EU as well) which will disadvantage off shore cash.

Investors after the initial sticker shock of increased tax rates will see cash coming into play more easily. Demands for effective economic deployment will grow. Investors did not buy to hold cash they can do that on their own.

George Gutowski writes from a caveat emptor perspective.

Google Achilles Heel; European Income Taxes; Not so Good for Google $GOOG $YHOO $FB $TWIT

Google (Nasdaq:GOOG) pays next to no income taxes on European revenues. UK, France and Germany all have Google in their sights. Google currently designates units in those countries as providing marketing and support services to Google Ireland which in turn transfers most of its turnover to an affiliate in Bermuda.

The structure is legally sound for now. except the guys who make the laws no longer like it. Google is advertising for sales and marketing staff in UK, France and Germany. So if the sale becomes local because of the local sales and distribution arms taxes will become local as well.

European governments are all fighting austerity and other financial issues. Quite frankly they have no political choice but to increase tax revenues. Google is a fat cow which will be slaughtered as quickly as possible. The UK, France and Germany constitute and will always constitute the overwhelming bulk of Google European revenue.

While Google is currently in the tax mans sniper scope. Yahoo (Nasdaq:YHOO), Facebook (Nasdaq:FB) and Twitter (To be announced) who all will depend on European revenues will be treated in the same fashion.

Big increases coming to global income tax rates which means negative pressure on EPS and potential dividend rates.

Death and taxes are inevitable. Google is not on its death-bed so it must be taxes.

George Gutowski writes from a caveat emptor perspective.