Uber says IRS is probing its tax returns
The ride-hailing company says various state and foreign tax authorities are also looking into its taxes
Bengaluru — The US Internal Revenue Service is auditing Uber Technologies’s taxes for 2013 and 2014 and the ride-hailing company expects unrecognised tax benefits to be reduced within the next year by at least $141m.
In its full quarterly report on Tuesday, Uber said various state and foreign tax authorities were also looking into its taxes and that it was currently unable to put a definite timeline or estimate on the overall adjustments that might result.
The $141m amount 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.
Earlier in 2019, the company had said in a regulatory filing that it expected unrecognised tax benefits related to the audit to be reduced within the next year by at least $127m.
Industry experts characterise 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 and Amazon.
“Although the timing of the resolution and/or closure of the audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months,” the company said.
The announcement came on a day when at least 11 of the brokerages, whose underwriting arms backed Uber’s Wall Street debut in May, weighed in with “buy” recommendations on the company’s shares as a statutory embargo lifted. Citi, however, initiated coverage with a “neutral” rating.
Uber shares gained 1.5% in late morning trading as the technology sector bounced back from a sell-off on Monday.
The company’s stock has struggled since its market debut on May 10 and is trading below its IPO price of $45.
Still, the shares have outperformed rival Lyft, which have fallen by a third in value since its own debut in March, and analysts from Deutsche Bank said Uber’s stock remained the best internet IPO for investors since Facebook’s launch in 2012.
“Uber should trade at a premium to Lyft given Uber’s larger global scale and reach, cross product growth opportunity and larger ability for long-term leverage,” said analysts at Morgan Stanley. “It is still in the early innings in its core and emerging opportunities.”
In its first quarterly report as a public company last week, Uber reported a $1bn loss as it spent heavily to build up its food delivery and freight businesses.
But many of the analysts covering the stock on Tuesday said they believed Uber had the scale and time to develop into another powerful US global tech player.
RBC analysts believe the market under-appreciates Uber’s profit potential while analysts at Mizuho Securities expect the intense competition to rationalise over the next few years due to continued consolidation and listings of private peers.