eBay 2011 Annual Report Download - page 69

Our effective tax rate was 14% in 2010 compared to 17% in 2009 . The decrease in our effective tax rate for 2010 compared to the prior
year was due primarily to the settlement of multiple uncertain tax positions.
Our provision for income taxes differs from the provision computed by applying the U.S. federal statutory rate of 35% due primarily to
lower tax rates associated with certain earnings from our operations in certain lower-
tax jurisdictions outside the U.S. The impact on our provision
for income taxes of foreign income being taxed at rates different than the U.S. federal statutory rate was a benefit of approximately $772.0 million
in 2011, net of a $321.5 million charge for U.S. taxes on the sale of Skype, $441.0 million in 2010 and $476.0 million in 2009 . A significant
portion of these benefits, which totaled approximately $696.5 million in 2011, $284.0 million in 2010 and $300.0 million in 2009 resulted from
tax rulings we have received in certain foreign jurisdictions that provide for lower rates of taxation on certain classes of income and require
various thresholds of investment and employment in these jurisdictions. The foreign jurisdictions with lower tax rates that had the most significant
impact on our provision for income taxes in the periods presented include Singapore, Switzerland, Korea and Luxembourg. See "Note 18 -
Income
Taxes" to the consolidated financial statements included in this report for more information on our tax rate reconciliation.
Our provision for income taxes is volatile and, in general, is adversely impacted by earnings being lower than anticipated in countries that
have lower tax rates and higher than anticipated in countries that have higher tax rates. Our provision for income taxes does not include provisions
for U.S. income taxes and foreign withholding taxes associated with the repatriation of a substantial portion of undistributed earnings of certain
foreign subsidiaries because we intend to reinvest those earnings indefinitely in our foreign subsidiaries. If these earnings were distributed into the
United States in the form of dividends to eBay companies domiciled in the United States or otherwise, or if the shares of the relevant foreign
subsidiaries were sold or otherwise transferred, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax
credits) and foreign withholding taxes. Further, as a result of certain of our ongoing employment and capital investment actions and commitments,
our income in certain countries is subject to reduced tax rates and in some cases is wholly exempt from tax. Our failure to meet these
commitments could adversely impact our provision for income taxes.
From time to time, we engage in certain intercompany transactions and legal entity restructurings. We consider many factors when
evaluating these transactions, including the alignment of our corporate structure with our organizational objectives and the operational and tax
efficiency of our corporate structure, as well as the long-term cash flows and cash needs of our different businesses. These transactions may
impact our overall tax rate and/or result in additional cash tax payments. The impact in any period may be significant. These transactions may be
complex and the impact of such transactions on future periods may be difficult to estimate. In 2009, we completed a legal entity restructuring as a
result of which we transferred approximately $1.1 billion in cash to the U.S. The tax impact of this restructuring was included in our 2009
provision for income taxes. As a result of this transaction, we made a cash payment for taxes of approximately $207.4 million during the first
quarter of 2010.
We are regularly under examination by tax authorities both domestically and internationally. We believe that adequate amounts have been
reserved for any adjustments that may ultimately result from these examinations, although we cannot assure you that this will be the case given the
inherent uncertainties in these examinations. Due to the ongoing tax examinations, we believe it is impractical to determine the amount and timing
of these adjustments.
Liquidity and Capital Resources
Cash Flows
Operating Activities
We generated cash from operating activities in amounts greater than net income in 2011 , 2010 and 2009 , due primarily
62
Year Ended December 31,
2011 2010 2009
(In thousands)
Net cash provided by (used in):
Operating activities
$
3,273,674
$
2,745,760
$
2,908,086
Investing activities
(3,306,862
)
(2,282,470
)
(1,149,383
)
Financing activities
(838,496
)
1,234,406
(945,656
)
Effect of exchange rates on cash and cash equivalents
(14,626
)
(120,103
)
(2,157
)
Net increase/(decrease) in cash and cash equivalents
$
(886,310
)
$
1,577,593
$
810,890