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For Microsoft, $93B Abroad Means Avoiding $30B Tax Hit
walterbyrd (182728) writes "Microsoft Corp. is currently sitting on almost $29.6 billion it would owe in U.S. taxes if it repatriated the $92.9 billion of earnings it is keeping offshore, according to disclosures in the company's most recent annual filings with the Securities and Exchange Commission. The amount of money that Microsoft is keeping offshore represents a significant spike from prior years, and the levies the company would owe amount to almost the entire two-year operating budget of the company's home state of Washington."
The summary, of course, missed Microsoft's legitimate response to people's enquiries:
The company says it has "not provided deferred U.S. income taxes" because it says the earnings were generated from its "non-U.S. subsidiaries” and then "reinvested outside the U.S.”
It's almost like the editors wanted to publish a biased article or something. Scandalous.
Because most, if not all, of the big companies use various means to offshore money that should have US taxes paid on them oversea so they can avoid it.
Apparently Microsoft is no exception to that, nor even all that exceptional if that's all they've "shielded" from US taxation.
because they don't pay tax on it there either.
But shouldn't that be up to the foreign countries where the money is earned? If a country doesn't want to tax earnings in its borders, that's their business. It doesn't mean the US or any other country should have a claim on it.
If I can be modded down for being a troll, can I be modded up for being an orc, or a balrog?
RTFA.
-Microsoft develops product in U.S, generating tax credit for R&D.
-Microsoft shifts ownership, or "Profit Rights" of product off-shore, to say....The Bahamas.
-Microsoft Bahamas subsidiary sells U.S developed product to Americans.
-Microsoft Bahamas claims all profit. Microsoft America gets all Tax Credits.
And that's how they avoid paying taxes. It's legal. It might not be "right," but it's legal, and won't change until our nation's useless politicians do something about it. This debate has been going on for a decade or more.
Freedom of speech isn't freedom from consequences of your speech, sweet cheeks. He's free to associate with a disgusting ideology that holds certain people inferior because of how they're born, I'm free to mock him for it. For that matter, I'm free to mock your ignorance.
Hail Eris, full of mischief...
E pluribus sanguinem
The USA is unique in considering all income earned anywhere to be taxable in the USA, even if that money never actually touches America. No other country has a tax system that works like this, perhaps because it's stupid. Instead they have double taxation treaties so if money is earned abroad and you pay taxes there, you can spend the money back home at your HQ without it being taxed a second time. America doesn't, so companies that earn a lot of money abroad simply don't spend it on their HQ. They find things to spend it on in other countries instead.
Instead they have double taxation treaties so if money is earned abroad and you pay taxes there, you can spend the money back home at your HQ without it being taxed a second time. America doesn't,
[Citation Needed]
Rebuttal: The US system works by requiring Corporations to pay the difference between the foreign and US taxes.
Citation: http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z
/Personal income is likely to get double taxed, but that's not what we're talking about.
[Fuck Beta]
o0t!
Go on, attack and mock those who you don't agree with. Attack me all you want. It just shows your intolerance. Not that those who agree with you care that you are all intolerant. Intolerance is now the greatest virtue of the liberal mind, as long as it is in support of liberal ideology.
It's amazing, isn't it, just how many conservative victims are on /. these days. Bonus points for whining about someone not tolerating your intolerance, and for whining about it in an intolerant way.
And here I thought conservative ideology was that we should man up and not worry about hurt feelings or political correctness. Shows what I know.
Hail Eris, full of mischief...
E pluribus sanguinem
I'd be interested to know if the majority of that money was in Ireland. If it wasn't, this is a non-story. If it was... well, there are ways of making the money "non-US" and you can rest assured that MS knows ALL of these ways. Their tax lawyers are just as good as IBM's IP lawyers.
The 1% pushing the tax burden off on the 99%, who can't play international games with their finances.
No, that's not relevant. They play a shell game to make sure that all earned profits are earned in areas with little to no tax, then claim they made no profits. Or, if you're GE, you claim you made a $1B loss while reporting billions in profits to your shareholders.
Like what, pledging fealty to corporations and letting the people of the country subsidize their existence?
Which helps local municipalities only - ignoring that sales taxes are regressive.
Indeed, they claim the tax credits and losses in the US, but the profits outside. It's a massive scam, really.
It's almost like the editors wanted to publish a biased article or something.
Or a truthful one, see below.
And to those apologists who claim it's the laws that are at fault, not Microsoft, the thing to remember is that all those millions of dollars Microsoft has used to buy those laws were extorted from their customers. They charged massive monopoly rents for their lockin-based software so they could have enough cash to buy as many legislators as they needed to avoid funding infrastructure and civil protections in the states and countries they're based in.
Microsoft has a massive system by which to avoid taxation, detailed in another Senate report from last September.
American companies keep 60 per cent of their cash overseas and untaxed, some $1.7 trillion, according to a U.S. Senate HSGAC Permanent Subcommittee on Investigations released in September 2012.
That report used Microsoft as a case study for the leaps and bounds that U.S. corporations go through to minimize their tax exposure, and illustrate the current flaws with the international corporate tax regime.
The Senate investigation found that Microsoft reduced its 2011 federal tax bill by a whopping $2.43 billion — or 44 per cent — by using a wide, international network of controlled foreign corporations and the exploitation of various loopholes in the U.S. corporate tax code.
According to Microsoft, the company paid $3.11 billion in federal taxes in 2011.
According to the full Senate report, Microsoft Corp does 85 per cent of its research and development in the United States. Of its 94,000 employees, 36,000 are in product R&D. The company had reported revenues of $69 billion, but with a federal tax liability of $3.11 billion only paid an effective federal tax rate of 4.5 per cent. That’s much lower than the top statutory rate of 35 per cent for corporations.
Puerto Rico
Microsoft Operations Puerto Rico (MOPR) is the company that pays for the right to sell Microsoft products in the Americas. MOPR makes digital and physical copies of Microsoft software and sells it throughout the United States and the rest of the Americas through different regional distributors.
When an American buys a copy of Microsoft Office in a Best Buy in Manhattan, that was produced in and shipped from Puerto Rico.
MOPR is owned by a Bermuda-based entity, MACS Holdings, which in turn is owned by Round Island One, a fully owned Microsoft subsidiary that is based in Bermuda but operates in Ireland.
To review: An American buys a copy of Microsoft Office at Best Buy in Manhattan. Best Buy bought that copy of Office from a Microsoft distributor. The regional distributor bought that copy of Office from Microsoft Operations Puerto Rico. Microsoft Operations Puerto Rico is owned by MACS Holdings, which itself is owned by Round Island One, which itself is owned by Microsoft Corp.
The reason for that convoluted supply chain — the reason why that copy of Office wasn’t just shipped from Microsoft Corp in Redmond, Washington to Manhattan — is that 47 per cent of the profits from that sale go to Puerto Rico, untaxed by the U.S. federal government.
Those profits were taxed by Puerto Rico at an effective rate of 1.02 per cent in 2011, a massive savings from the U.S. corporate tax rate of 35 per cent. Over three years, Microsoft saved $4.5 billion in taxes on goods sold in the U.S. alone. The company saved $4 million per day by routing domestic operations through Puerto Rico.
Ireland
Microsoft Ireland Research (MIR) is the entity that buys into the R&D cost sharing agreement in exchange for the right to sell Microsoft in Europe, the Middle East and Africa.
MIR doesn’t actually create or sell any products to any customers. Instead, MIR immediately licenses the Microsoft intellectual property rights to Microsoft Ireland Operations Limited
Not sure if trolling or ignorant... so I'll give you the benefit of the doubt. Apple pioneered it, but an increasing number of tech companies rig up a series of subsidiaries based in Ireland and the Netherlands and assign their profits to those subsidiaries to escape US taxes, while the parent companies still take advantage of all the perks of basing themselves in the US.