Business, Economics and Jobs

Microsoft, HP avoided taxes through offshore units, Senate panel says


The Microsoft logo.


Justin Sullivan

A Senate panel said on Thursday that Microsoft and Hewlett-Packard used offshore units to avoid US taxes on billion of dollars, taking advantage of loopholes, according to Reuters.

The Senate's Permanent Subcommittee on Investigations said tax avoidance in the technology sector was rampant, with companies using intellectual property, royalties and license fees in tax havens to skirt taxes in America.

According to the report, Microsoft saved nearly $7 billion on its tax bill since 2009, while HP shifted billions of dollars between two offshore subsidiaries, thus avoiding paying taxes, CNN Money said.

The panel, headed by Michigan Democrat, Sen. Carl Levin, investigated dozens of companies which shifted profits offshore, but focused on Microsoft and HP. The report was also supported by Republicans on the panel, who stressed that it found nothing illegal, CNN Money reported.

"The tax practices and gimmicks range from egregious to dubious validity," Levin said, according to CNN Money. "What these gimmicks do is shift the burden of taxes to citizens that don't use armies of lawyers and accountants and subsidiaries to lower their tax bill."

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Sen. Tom Coburn, the top Republican on the panel, said, "Our report is about the symptoms of the disease, not the real disease," according to Bloomberg.

"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," said Bill Sample, Microsoft's corporate vice president for worldwide tax, in a written testimony. "In conducting our business at home and abroad, we abide by US and foreign tax laws as written," he said, according to Bloomberg.

"We are disappointed to see what appears to be a politically motivated attack on one of America's largest employers," said HP spokesman Michael Thacker, according to Reuters.

Reuters noted that US companies have at least $1.5 trillion in profits offshore, most of them saying the profits are kept there to avoid US tax. Of the top ten companies with the largest amounts of cash abroad, five are tech companies.

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