IRS investigates The Transfer Pricing Position Of US Ride-Hailing Company

; posted on
June 6th, 2019

Uber Technologies Inc. is being examined by U.S. tax authorities and said that its potential tax charges in a number of key markets could change. The ride-hailing company expects unrecognized tax benefits to be reduced within the next year by at least $141 million.

Background

News of Uber’s tax audit comes one day after it was leaked that regulators are preparing investigations into anti-competitive practices at Google, Facebook and Amazon. An IRS investigation into Uber will probably reinforce the impression that political and regulatory winds are turning against big tech.

In its first quarterly report as a public company last week, Uber reported a $1 billion loss as it spent heavily to build up its food delivery and freight businesses. Furthermore, the company’s stock has struggled since its market debut on May 10 and is trading below its IPO price of $45. Due to this situation, IRS decided to probe the 2013-2014 tax return of Uber as IRS alleged the company performing transfer pricing to shift the profit abroad.

Arrangement

The tax benefit enjoyed by Uber, amounting to $141 million, related only to its transfer pricing positions, which refers to the common multinational practice of charging for services between wholly-owned businesses in different countries or jurisdictions to reduce the tax it pays. Consequently, its tax advantages are to be cut due to its “transfer pricing positions”.

Industry experts characterize transfer pricing as a relatively risky strategy, which typically is among multinationals’ top tax concerns and has been used by authorities in the past to go after Apple Inc and Amazon.

In response to the tax audit, Uber said tax years from 2010 to 2019 could be at issue in a number of its key markets, including the US, UK, the Netherlands and India. The company said it has adequate cash reserves to meet its exposure.

Sources: Bloomberg, Reuters

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