How Microsoft Does it

[roo_ster]

http://isteve.blogspot.com/2011/07/how-microsoft-does-it.html

Yesterday, Microsoft announced it had made net income of $5.87 billion in the latest quarter, but had reduced its tax rate from 25% a year ago to 7%. Annualized, that would be about $4 billion incremental in tax avoidance just over the last year. You're probably saying to yourself, "Hey, I'd like to reduce my tax rate by 72% from 2010 to 2011, too! What are some tips from Microsoft on how I could do this?"
...

   Our effective tax rates for the fourth quarters of fiscal years 2011 and 2010 were approximately 7% and 25%, respectively. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore and Puerto Rico, which are subject to lower income tax rates.
...
Despite all you've heard about Microsoft being a software company, they are actually a manufacturing company, at least for tax accounting purposes. To the IRS, Microsoft is basically a Puerto Rican, Irish and Singaporean industrial goliath with a money-losing R&D outpost in Redmond, WA.
...

Do read the whole article, it is worth your while.

As for my opinion, being taxed once is enough.  Or, at least cap the max total tax applied to any dollar of revenue.

OTOH, if MS ever tries to pull a Bono and insist all good folks ought to pay more in taxes or "forgive" debt to third world cesspools, MS can eat me.

[Hawkmoon]

I concluded a long time ago that Bill gates is the antichrist, and I've seen nothing since then to change that opinion.

[AZRedhawk44]

Cisco is similar.

They keep profits off-shore and report a profit-losing R&D branch in CA.  Ireland, Switzerland, Hong Kong, etc.

There is trillions of dollars of profits being kept off shore, waiting for a "tax holiday" to repatriate it at a lower rate.  That capital could do a lot for our economy if allowed back in.

http://finance.yahoo.com/news/Ciscos-6500-Job-Cuts-May-Hurt-bloomberg-3852566033.html?x=0

[AJ Dual]

A corporate tax-rate that was the lowest of all industrialized nations would leave the U.S. with more business and revenue, and ancillary economic activity revenue than we knew what to do with.

[Brad Johnson]

I concluded a long time ago that Bill gates is the antichrist, and I've seen nothing since then to change that opinion.

BG isn't the antichrist, he's a shrewd businessman who has figured out a way to work within our hideously burdensom corporate taxing structure and still keep the profits flowing to his shareholders.  Everyone who owns a share of his stock should be jumping for joy.  Considering that pretty much ANYONE who has a retirement account, no matter how small, has some form of stake in Microsoft's success, that means we all should be celebrating.  Anyone who works for Microsoft, and who has been smart enough to max out their employee-benefit stock purchase options, will be grinning from ear to ear.

Brad

[makattak]

A corporate tax-rate that was the lowest of all industrialized nations would leave the U.S. with more business and revenue, and ancillary economic activity revenue than we knew what to do with.

Couple that with a MUCH less intrusive regulatory state (environmental, employment, financial, governance, etc...) and the recovery would dwarf the 80's.

I'd be willing to bet there'd even be new manufacturing jobs.

[GigaBuist]

Microsoft, Cisco, Exxon, GE, etc. are all doing this.  When you're a bit multi-national company it just makes sense to harbor your income in countries where the tax rate is lower.

I don't fault them for this.  They're just waiting for another "tax haven" to bring it all back, and we should probably do that right about now.  It'll be a nice short-term boost to revenue.

Long term I'd like to see us drop the corporate tax rate to compete with the rest of the world.  That means dropping it to around 15-18%.  There are multiple reasons for this.

1)  It prevents the desire to off-shore profits.  That means more tax revenue.
2)  It promotes keeping the income within the company and not handing it out as bonuses to execs.  Hence they use the money to further their business which stimulates growth.
3)  It lets the "small" guys compete on an even playing field.  The small guys cannot offshore their income.  The big guys can.  Competition is always good.

[Scout26]

Small to mid-sized companies do it here in the states.

I know of four trucking companies that moved to Indiana once Gov. Quinn and the Dems in Springfield jacked up the Corporate tax rate.   That's a net loss in revenue for the State of Illinois.  I've got a bet that next years total tax receipts are less then this years for the state of Illinois.  Then you'll see my shocked face--->


Didn't our own Jamis move from Virginia (with a State Income Tax) to Texas (without a State Income Tax), and that Taxes (along with gun laws) was one of the driving factors in the move ?

[Nick1911]

I'm with Brad on this one.

The law allows for it, and it's good business.  I don't see any moral or ethical problem with their actions.

[Balog]

I'm with Brad on this one.

The law allows for it, and it's good business.  I don't see any moral or ethical problem with their actions.

The problem lies in the laws that encourage it.

[makattak]

The problem lies in the laws that encourage it.

No, the problem lies in the laws that discourage investment in the US.

[MechAg94]

Couple that with a MUCH less intrusive regulatory state (environmental, employment, financial, governance, etc...) and the recovery would dwarf the 80's.

I'd be willing to bet there'd even be new manufacturing jobs.

Also, reduce the regulatory and tax cost of hiring employees in the US also.

[cassandra and sara's daddy]

look at all the trailers registered in maine.  or corps in delaware

[MicroBalrog]

look at all the trailers registered in maine.  or corps in delaware

He ain't joking.

There's several companies - including some in Israel, capitalizing on the... reputation Jews have in the financial field - that, for a small fee, will help your company, large or small, create an off-shore. A friend of our family once created a company with 4-5 employees... they had a Cyprus off-shore account.

[41magsnub]

Same concept on a lesser scale:

I have a law firm client that all they do is vehicle registrations in Montana for out of state folks to dodge their state's sales tax and more costly vehicle registrations.  The folks buy and license the rig here under a corporate entity, then drive it home.  They primarily do RVs but there are regular cars, ATVs, and etc too.  They have signage up at all the local RV dealers and ads in the various RV publications.  When you get into the higher cost vehicles this is a significant cost savings.

It seems a bit shady to me but they get away with it and it apparently is on the up and up.

[cassandra and sara's daddy]

pay personal property tax in va and it will seem like a great idea
one i may have to use  how far is it from sioux falls to where i can sign up?

[41magsnub]

http://www.bennettlawofficepc.com/Registration_Services

Huh, as I read their site I understated what they do a bit.

[dogmush]

It's the way we wrote the tax code.

Heck, if I found out any company I was a stockholder in wasn't doimg this with their profits i'd want to know why.

And they might be open to legal action. I remember reading some where that a company could be sued if they did something stupid that lost stockholdefs money. "Due Dilligance" maybe? Something, that said if a money saving thing is well known and industry standard they could be held liable for not doing it