We really need to simplify our tax code, cut the business tax rate (currently highest in the world) and eliminate the many loopholes that corporations have lobbied for. We need to level the playing field.
Case in point - Microsoft. From the Seattle Times:
How Microsoft moves profits offshore to cut its tax bill
When someone buys a copy of Office at the Microsoft Store in Bellevue Square, that cash doesn’t take the short route to the company’s Redmond headquarters four miles up the road.
Instead, after accounting for state taxes, the profit goes to a Microsoft sales subsidiary in Nevada.
From there, much of that money begins a complicated global trek that ultimately leads across the Atlantic, with two stops on the island tax haven of Bermuda.
Microsoft in the past 20 years built that network of subsidiaries in part to minimize the taxes it pays to governments worldwide.
The company is hardly alone. Many multinational corporations have set up similar structures, in some cases reducing their tax burden to near zero.
But a court fight this year between Microsoft and the Internal Revenue Service brought to light new documents outlining the deals that set up the company’s structure. Additional court papers, corporate filings and tax records from four continents offer a rare, detailed look at the business of avoiding taxes.
In the case of the Office purchase at Bellevue Square, after paying state taxes, the company sends the money to the subsidiary in Reno, Nev. After landing in Nevada, more than half the cash from the sale goes to a Puerto Rican entity.
The Puerto Rican company, after paying a 2 percent local tax and accounting for a share of Microsoft’s research costs, passes a portion of the remaining cash to an Irish company.
The final stop is an entity called RI Holdings. Its headquarters is a law firm in Hamilton, Bermuda, a United Kingdom territory that charges no corporate tax.
Similar structures cover Microsoft’s operations across the globe.
A long article but an interesting read. A perfect example of crony capitalism at work - it is all legal but not ethical. The article also covers Amazon, Boeing and Starbucks.
Leave a comment