Microsoft's tax dodge
Software giant 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.
According to the International Business Times 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.” Tax experts, however, say that details of the filing suggest the company is using tax shelters to dodge the taxes it owes as a company domiciled in the United States.
Microsoft’s use of the offshore subsidiary tactics has exploded in the last five years, with the amount of Microsoft earnings shifted offshore jumping 516 percent since 2008, according to SEC filings.
According to Microsoft’s filings, if the company repatriates the $92.9 billion it is holding offshore, it would face a 31.9 percent U.S. corporate tax rate. U.S. law generally permits companies to deduct the foreign corporate taxes they’ve already paid from the U.S.’s official 35 percent corporate tax rate. According to Citizens for Tax Justice's Richard Phillips, that means Microsoft's disclosure implies the company is paying just 3.1 percent in the locales where it is currently holding the cash. Phillips says such an extremely low rate strongly suggests the firm is keeping the earnings not just in relatively low-tax locales like Ireland, Singapore and others the company has disclosed, but also in smaller countries like Bermuda that are considered true tax havens.
According to a Wall Street Journal report in 2012 about companies reducing transparency about their subsidiaries, Microsoft “once disclosed more than 100 subsidiaries [but] reported just 13 in its 2003 annual report and 11 in its 2012 report.”
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