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Google and SEC in tax dispute

The SEC doesn't like the way Google accounts for income tax, but the search giant is standing firm
Written by Colin Barker, Contributor on

Google and the Securities and Exchange Commission (SEC) have been in dispute since March over "various issues" including the way in which Google accounts for income tax, the search giant revealed on Friday.

According to Google's annual report for 2006, filed with the SEC on Thursday, the issue remains unresolved (See paragraph 32, "Unresolved Staff Findings", in the Google document.)

The commission has expressed concerns about "various issues with respect to our public filings, including our provision for interim period effective", said Google in its filing. The dispute has been batted backwards and forwards seven times between Google and the SEC, the last time on 30 January this year.

In this last filing, Google admitted that the two sides have come to an impasse. "We have not resolved the comment," said Google in the filing. "We believe that we properly account for our income taxes. We will continue to work to resolve these comments with the SEC."

This is the first time Google has found itself at loggerheads with the American financial regulator, despite conjecture around the financial community about possible problems that may stem from the public activities of the company.

In March of last year, the SEC was alerted when Google's shares tumbled after the company's chief financial officer, George Reyes, admitted that "most of what's left is just organic growth, which means you have to grow your traffic and you have to grow your monetisation".

The SEC, which is always watching for possible evidence of share manipulation, generally takes an interest in a company when its shares move suddenly after a senior executive makes public comments.

There were also suggestions that Google might face investigation after its company founders gave an extensive interview to Playboy Magazine during the company's "quiet period", when executives are expected to refrain from public comments.

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