Microsoft, HP Accused of ''Skirting'' U.S. Taxes

Reuters reports that both Hewlett-Packard and Microsoft are refuting claims that they use offshore units and loopholes to prevent Uncle Sam from yanking taxes from their billions of dollars in profits.

The claims were made by the Senate's Permanent Subcommittee on Investigations which claims that tax avoidance is running rampant in the technology sector. Tech companies like Microsoft and HP have reportedly stashed away their intellectual properties, royalties and licensing fees in "overseas tax havens" to skirt government taxes.

The report arrives after the panel subpoenaed internal documents from the two companies, and interviewed their top officials. "The tax practices and gimmicks range from egregious to dubious validity," said Democratic Senator Carl Levin, chairman of the panel during a news conference.

Senator Tom Coburn, the top Republican on the panel, admitted that tax avoidance is not illegal. But he also blamed Congress for creating the situation, referring to complex tax code and a hefty 35-percent corporate tax rate. Very few companies pay that rate, he said.

Now here's the shocker. Microsoft reportedly shifted $21 billion to offshore accounts from 2009 to 2011, almost half of its U.S.-based retail sales revenue. Thus, the Redmond company saved up to $4.5 billion USD in taxes on goods that were sold here in the States. The company has even moved royalty revenue of units to low-tax nations to avoid paying billions to the U.S.

It gets even better. Levin told Reuters that the Redmond company legally established one Microsoft Singapore unit in Bermuda unmanned. Wanting to know why, Levin asked Microsoft's tax vice president, William Sample, if this office was established merely to cut its tax bill. Sample confirmed with a "yes, that is correct."

The report goes on to reveal that HP avoided paying millions of dollars in taxes by using an exception in the law for short-term loans. The company reportedly funded its U.S.-based operation through intra-company loans. Now more than 90-percent of HP's cash is sitting offshore, and one document even suggests that HP has slipped cash into the States without paying the appropriate taxes.

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

To read the full report, head here.

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  • aicom
    Maybe if the taxes on profits weren't so high, companies wouldn't try to evade them.
  • nieur
    Those are international companies and there is nothing wrong if they are LEGALLY trying to increase net profit
  • alikum
    Politicians will always be politicians. You keep demanding more taxes while doing close to nothing.
  • Pennanen
    aicomMaybe if the taxes on profits weren't so high, companies wouldn't try to evade them.Maybe if people actually paid the taxes instead of avoiding them, the taxes wouldnt be that high.
  • zoemayne
    so i looked at the main article and there is also no mention of apple which has to be the biggest offender here or at least they have the highest current growth rate of overseas $. but it's not illegal.. they should let the money in @ ~10% etc only if it directly increases employment...
  • cmichael138
    Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.
  • Dear god. Stop raising the taxes of the lower/middle classes! Fix loopholes and penalize companies for this kind of tax evasion, christ!
  • Microsoft and HP have profited handsomely from suckeling at uncle Sams tits, high tech tax breaks and H-1B visas to name a few! Microsoft for one, if found guilty, should be forced to rewrite the Visual Studio 2012 GUI to look more like the Visual Studio 2010 and previous editions of the IDE! Humans and their ancestors developed color perception over the eons to better differentiate the lush green forest from the tiger that is about to pounce and devour, should the ability to make out color be diminished in any way! Now Microsoft wants to make everyone color blind! Microsoft what do you and your “style mavens” know that evolution and the rest of us do not!
  • nebun
    cmichael138Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.cmichael138Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.very true....i don't blame companies that are building offshore...good for them
  • mcd023
    well, they were paying taxes at the lower rate before 2009, it seems. Now, the gov't isn't getting as much as it would have with a lower rate. But at 35% (Are you freaking serious!?!?), I'd be finding ways to keep my money, too. that's