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Comment by theelfismike | Hacker News Reader

Interesting the effective tax rate went from 5% last year to 22% this year.

What would cause that?

Someone else will have to explain what on earth it means, but last year's press release said

> For Q4 2015, our effective tax rate reflects impact of certain one-time items in the U.S., specifically the resolution of a multi-year audit with an ETR impact of 9%, as well as the full year impact of the R&D tax credit with an ETR impact of 8%.

https://abc.xyz/investor/news/earnings/2015/Q4_google_earnin...

ETR = effective tax rate.

Ruth mentioned this on the call:

"Porat replied, “In terms of, you noted the one-time item, there are really two I’m actually going to call out. One was in the cost of revenues. I noted that as equipment costs were elevated by some one-time charges, and so there was some pressure there. And then the other item I noted was with respect to our tax rate. I noted that there was slightly elevated tax rate this quarter. It’s always affected by the geographic mix of results but we did have a discrete that affected the US tax rate, to make that clear.”"

It still doesn't answer the question. Basically a one time charge increased the tax rate. In one of the live blogs, an analyst mentioned some windfall tax from Europe. But now I can't find it.

For FYE 2012 through the end of 2015 Alphabet's Income After Tax has been, on average, 81% of its Income Before Tax. That implies a 19% average tax rate. Excluding Q4 2015, the same ratio for Q3 2015 through the end of Q3 2016 was 82%. That implies an 18% average tax rate.

The anomaly was Q4 2015, not this most-recent quarter.

Source: Google Finance

I was puzzled by the difference in ETR in Q42015 and Q42016 (5% vs 22%). What happened in Q42015 that made the ETR so low?

Getting the heat for tax avoidance in multiple countries?

I'd have to take a look at their statements to see, but it sounds like they had some one-time charges that resulted in a tax benefit thereby reducing how much they had to pay in taxes, ergo the 5% rate. And since those no longer apply(being one off items) their tax rate is back where it should be.

Mean reversion?

5% is very unusual.

You don't pay taxes on the mean. They are unusual because they were minimized.

"Reversion to the mean" is the process where later data is more typical than an outlying datum, so aberrations caused by outliers are averaged out, giving a result progressively closer to the mean of the data as subsequent data is added.

In short, that the rate over a decade instead of over a year is the official corporate tax rate. For Google it doesn't work out this way, still.

You really should Google the phrase "reversion to the mean", because you clearly have no idea what is going on but remain confident.

Googles mean or even max is far from 35% over their entire history. I fail to see the relevance of your argument.

Perhaps you think Google will eventually in the future pay 35% and everything in the past was just an anomaly?

Because it's a laughable thought, or if you're absolutely convinced that is the case you're incredibly naive.

You're mixing up mean reversion with extrapolation.

Where did you get the 35% number from?

You know Google is a global company, right? Corporate income tax rate in Ireland is 12.5%.

Have you seen any global company paying 35% income tax?

Does that mean that its profits would be volume weighted based on where they're earned? Because they still do not match up, 12.5% would be the lower boundary - of which Google was below on many years. What you've come up with is a rationalisation.

There is no way you can spin it, there is clear avoidance & the excuse is a battle on details of the law.

Getting called-out on Europe tax avoidance via Ireland would be a good guess.

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