Symantec hit with $1 billion tax claim

"Uncle Sam says Symantec, the maker of Norton antivirus software, owes more than $900 million in back taxes as a result of its $10.25-billion acquisition of Veritas" (see RED HERRING Symantec Faces Hefty Tax Bill)

There is a separate claim from the IRS against Symantec for $100 million. Both claims do not include charges for interest and penalties, which can be extremely aggressive.

The IRS is contesting Symantec's Transfer Pricing scheme for an Irish subsidiary used to distribute products around the world. Ireland is a well known and well used tax haven that attracts a significant amount of business through tax statutes that are favorable to companies.

The IRS is claiming that Symantec undervalued its product as it sold (transfered) the product from the US to Ireland, where it was later marked up and resold around the world.

Transfer Pricing is a term that loosely translated can be viewed as transfering profits. As the price in one locale goes up, the profits go up. As the price goes down the profits go down. Revenue Agencies around the world square off with companies and each other to insure that they each get their fair share of the taxable base.