eBay 2012 Annual Report Download - page 50

We must continue to effectively hire, train and manage new employees. If our new hires perform poorly, if we are unsuccessful in hiring,
training, managing and integrating new employees, or if we are unsuccessful in retaining our existing employees, our business may be harmed.
Our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. To effectively
manage the expected growth of our operations and personnel, we will need to continue to improve our transaction processing, operational and
financial systems, procedures and controls. This is a special challenge as we acquire new operations with different and incompatible systems.
Any capital investments that we may make will increase our cost base, which will make it more difficult for us to offset any future revenue
shortfalls by expense reductions in the short term. Failure to implement these improvements could limit our ability to manage our growth and
adversely affect our operating results.
We may have exposure to greater than anticipated tax liabilities.
The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment, and
there are many transactions and calculations where the ultimate tax determination is uncertain. Like many other multinational corporations, we
are subject to tax in multiple U.S. and foreign tax jurisdictions and have structured our operations to reduce our effective tax rate. Our
determination of our tax liability is always subject to audit and review by applicable domestic and foreign tax authorities, and we are currently
undergoing a number of investigations, audits and reviews by taxing authorities throughout the world, including with respect to our tax structure.
Governments are increasingly focused on ways to increase revenues, which has contributed to an increase in audit activity and harsher stances
taken by tax authorities. Any adverse outcome of any such audit or review could have a negative effect on our business, operating results and
financial condition, and the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our
financial results in the period or periods for which such determination is made. While we have established reserves based on assumptions and
estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient in the event that any taxing
authority is successful in asserting tax positions that are contrary to our positions.
In light of serious ongoing fiscal challenges in the U.S. and many countries in Europe, various levels of government are also increasingly
focused on tax reform and other legislative action to increase tax revenue, including corporate income taxes. For example, the economic
downturn reduced tax revenues for U.S. federal and state governments, and a number of proposals to increase taxes from corporate entities have
been implemented or are being considered at various levels of government. Among the options have been a range of proposals included in the
tax and budget policies recommended to the U.S. Congress by the U.S. Department of the Treasury to modify the federal tax rules related to the
imposition of U.S. federal corporate income taxes for companies operating in multiple U.S. and foreign tax jurisdictions. If such proposals are
enacted into law, this could increase our effective tax rate. A number of U.S. states have likewise attempted to increase corporate tax revenues by
taking an expansive view of corporate presence to attempt to impose corporate income taxes and other direct business taxes on companies that
have no physical presence in their state, and taxing authorities in foreign jurisdictions may take similar actions. Many U.S. states are also altering
their apportionment formulas to increase the amount of taxable income/loss attributable to their state from certain out-of-state businesses.
Companies that operate over the Internet, such as eBay, are a target of some of these efforts. If more taxing authorities are successful in applying
direct taxes to Internet companies that do not have a physical presence in the jurisdiction, this could increase our effective tax rate.
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• Customer Account Billing . Our revenues depend on prompt and accurate billing processes. Our failure to grow our transaction-
processing capabilities to accommodate the increasing number of transactions that must be billed on our and our subsidiaries'
websites would harm our business and our ability to collect revenue.
• Customer Service . We continue to focus on providing better and more efficient customer support to our users. We intend to provide
an increased level of support (including an increasing amount of telephone support and supporting an increasing number of
languages) in a cost-effective manner. If we are unable to provide customer support in a cost-effective manner, users of our products
and services may have negative experiences, current and future revenues could suffer, our costs may increase and our operating
margins may decrease.
• Technology Platforms . We continue to focus on upgrading and developing our systems and infrastructure to accommodate the
growth of our businesses and to improve the functionality and reliability of our websites and services at a reasonable cost while
maintaining 24/7 operations. Risks associated with our failure to do so are described under the captions “If we are unable to cost-
effectively upgrade and expand our websites, services and platforms, our business would suffer” and “Systems failures and resulting
interruptions in the availability of our websites, applications, products or services could harm our business.”