Microsoft is sitting on $92.9 billion held offshore on which it would owe $29.6 billion if the money were repatriated. This is according to the company’s most recent annual filing with the Securities and Exchange Commission.
That makes it the third largest corporate tax avoider in the country behind Apple and General Electric, and part of a small but growing fraternity of U.S. based corporations manipulating the tax codes of the U.S. and other nations to avoid paying taxes.
This is also a sharp increase over previous years, and while the company has been increasing the amounts held offshore on monies earned on products developed and sold here in the U.S., it has disclosed a rapidly declining number of foreign subsidiaries.
In a 2012 report, the Wall Street Journal said that the company “once disclosed more than 100 subsidiaries [but] reported just 13 in its 2003 annual report and 11 in its 2012 report.”
In testimony before the Senate Permanent Subcommittee on Investigations in 2012, William J. Samples, the company’s corporate VP for worldwide tax, said:
“Microsoft’s tax results follow from its business, which is fundamentally a global business that requires us to operate in foreign markets in order to compete and grow. In conducting our business at home and abroad, we abide by US and foreign tax laws as written. That is not to say that the rules cannot be improved — to the contrary, we believe they can and should be.”
This statement amounts to an admission that the company, like a growing number of others, is manipulating the tax laws not only in the U.S. but in other countries where they operate.
The practice, known as “inversion” is becoming increasingly disapproved of by the public and with political figures. President Obama criticized the practice in a July speech, accusing companies of “fleeing the country to get out of paying taxes.”
Microsoft is not technically employing inversion since it has not declared itself to be a subsidiary of a foreign corporation but it is using its own foreign subsidiaries to avoid paying taxes in the U.S.
The Senate Subcommittee on Investigations found that the company uses a:
“complex web of interrelated foreign entities to facilitate international sales and reduce US and foreign tax. Despite the [company’s] research largely occurring in the United States and generating US tax credits, profit rights to the intellectual property are largely located in foreign tax havens.”
“Microsoft US avoids US taxes on 47 cents of each dollar of sales revenue it receives from selling its own products right here in this country. The product is developed here. It is sold here, to customers here. And yet Microsoft pays no taxes here on nearly half the income,” said Senator Carl Levin (D-MI).
A July poll by Americans for Tax Fairness found that a majority of likely voters is unhappy with the tax avoidance practices by large corporations as well, finding that more than two thirds of voters say that the practice is wrong including 86% of Democrats, 80% of Independents and 69% of Republicans.
h/t: Moyers and Company