Google admits tax dispute with SEC

The Securities and Exchange Commission (SEC) has launched an investigation into the way Google accounts for its taxes, according to the search firm's annual report for 2006.

The US financial watchdog sent Google a first letter on 16 March 2006 and the case is still pending.

"The SEC continues to review our response to the comment letter received on 21 December 2006, and we have not resolved the comment described above," Google said in its annual report.

"We believe that we properly account for our income taxes. We will continue to work to resolve these comments with the SEC."

Google warned investors that it still relies heavily on advertising revenue, and is facing "formidable" competition from Yahoo and Microsoft.

Competing against these two will prove a challenge because both brands have better established relationships with customers and end users. Microsoft, furthermore, has significantly more cash resources to fund research, Google warned.

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