Shutterstock photo
Markets

Google in tax dispute with Indian authorities (GOOG)

Shutterstock photo

Shutterstock photo

Internet search engine leader Google ( GOOG , quote ) is defending itself from claims that it has been hiding part of its revenue from India's income tax department. Google is rolling after a report in India's Economic Times newspaper that quoted domestic authorities as saying the company's profit-and-loss statement "does not give a complete picture of the businesses."

The report went on to say GOOG was served a tax assessment order this week.

Google reported revenue of only 749 million Indian rupees ($14 million) for the assessment year 2008-2009. New Delhi's tax department says that figure underestimates the real number by 55%.

What the tax office is really questioning here is Google's practice of paying tax on its net income from advertisements after crediting a sizable amount as distribution fees to Google Ireland.

For its part, Google stated it makes a "very substantial" contribution to India's local and national taxation. At any tax rate, if revenue reported in India is only $14 million, it is unclear just how "substantial" that contribution could actually be.

Some perspective: GOOG reported $9 billion in revenue last quarter.

The company could completely shut down in India tomorrow -- or on the opposite extreme, pay a 99% rate on its Indian revenue -- and the absence would barely move the needle.

That is an opportunity for traders hoping that Google can grow in India. Right now, it only indicates how limited its penetration of this huge high-technology market really is.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos