Massive US companies using loopholes to avoid paying taxes is nothing new, but a new US Senate memo gives us an idea of just how one much one company has avoided paying. According to Bloomberg Businessweek, a memo penned by Michigan democrat Carl Levin and Oklahoma republican Tom Coburn, who both head up the Senate’s Permanent Subcommittee on Investigations, claims that over the past three years, Microsoft has avoided paying $6.5 billion in US taxes. The funny thing about all of this? Microsoft hasn’t done anything illegal by avoiding that hefty tax bill.
The same goes for HP, which is another company the memo focuses on. In Microsoft’s case, the company used transactions with its subsidiaries located around the world – Puerto Rico, Ireland, and Singapore are all specifically mentioned – to save on its tax bill. With HP, the company had its off-shore subsidiaries give it short-term loans, which meant that HP had tax-free capital to put toward domestic projects. The memo precedes a Senate hearing on this issue, with HP and Microsoft both scheduled to testify today.
This isn’t just limited to HP and Microsoft either – Levin says that he focused on those two companies to highlight a problem present with a large number of US companies. Both companies claim that they haven’t done anything illegal, and that much seems to be true, with Levin blaming this problem on lax IRS enforcement and the presence of too many IRS loopholes, many of which Congress is responsible for. Of course, it’s easy to see why American companies try to avoid paying as much American tax as they can, since the 35% corporate tax rate in the US is higher than in other places around the world.
That high tax rate has technology companies like Microsoft and HP transferring “intangible assets” like patents overseas in an attempt to save a little cash. It isn’t much of a surprise to hear that all of this is going down either, since the tax code in the US is so mind-numbingly complicated that there are plenty of loopholes for companies with good lawyers and accountants to take advantage of. One thing is definitely certain, however: if Congress wants to do something to stop this problem, it has a lot of work ahead of it. Stay tuned.
US Senate claims Microsoft avoided paying $6.5 billion in taxes is written by Eric Abent & originally posted on SlashGear.
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