Bloomberg reporters Alex Barinka and Jesse Drucker just wrote an interesting article about how one large multinational is using its tax haven structures, which are typically put in place to supercharge foreign earnings by moving them to low tax jurisdictions through aggressive transfer pricing, to boost earnings when sales slowdown.  Based on an analysis of IBM’s financials, last year IBM drove its effective tax rate down to the lowest levels in 20 years, a mere 15.6% instead of the normal corporate income tax rate of 35%.

IBM is becoming more aggressive in its tax planning tactics.  IBM fell two places on the Ferraro 500 despite the fact that its reserves increased from $5.58 billion in 2011 to $5.67 billion in 2012.  It will be interesting to see IBM’s tax reserves for 2013 once it files its 10-K.  Since we started tracking tax reserves for the Fortune 500 in 2010, using reserves from 2009, IBM has increased its tax reserves by nearly a billion dollars.  It should be noted that the tax reserves that are reported are for those position that the company does not feel will be sustained on audit.  This type of large-scale aggressive corporate tax planning is ripe for a whistleblower to come forward with information identifying the flaws in these tax schemes.

Lynam Knott