Tax

Groupon to Seek Better Tax Jurisdictions

Groupon grew so fast it had no time to think about lowering its tax rate globally. That's all changing, says CFO Jason Child at the CFO Rising West...
Kathy HoffelderOctober 8, 2013

PHOENIX — Groupon is in the process of switching some of its intellectual property to lower tax jurisdictions around the world,  Jason Child, CFO of Groupon, said during a panel discussion yesterday at CFO’s CFO Rising West Conference.

Describing the company’s difficulties with tax compliance as the “perfect storm,” Child said that because Groupon grew so fast when it first opened its doors in 2008, it did not have the time to properly seek out the best tax jurisdictions for its business, which today has operations in 48 countries. Child explained that more than 5,000 copy-cat businesses sprang up around the globe in the early years of its operations, providing competitive challenges for Groupon that allowed it little or no time to shop for the best tax jurisdictions.

“We had business folks saying we need to move extremely quickly in every large country around the world to make sure we are capitalizing on all the growth potential there is. Any discussion about making sure we have an optimal structure for tax or any other reason was not really at the forefront,” he said.

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Today, however, operating in the most appropriate locales from a tax perspective is a priority for the firm. “That’s something we have been working on for the last year or so and we will continue working on it,” he said. ”From an international tax perspective, it’s never been more interesting than it is right now.”

Groupon, with offices in the United States, Europe, Latin America and Asia, currently pays local statutory tax rates. Its effective tax rate (the average rate at which its income is taxed) is in excess of 125 percent in the most recent quarter. But that could fluctuate once the company moves some of its intellectual property into lower cost tax jurisdictions, he said, adding, “Since every locale or tax jurisdiction is trying to find a way to get more tax revenue, it’s been challenging.”

Groupon had gross billings of $1.41 billion and revenue of $608.7 million as of the second quarter of 2013. Its free cash flow is back up to $29.2 million from negative $6 million in Q1 2013 and slightly more than the $26 million reported in the fourth quarter of 2012.

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