- Using tax loopholes, Microsoft avoided paying at least $6.5 billion in U.S. taxes from 2009 to 2011, according to the U.S. Senate Permanent Subcommittee on Investigations.1
- One major tax loophole used by Microsoft was to shift 47% of its gross revenues from U.S. sales to its subsidiary, Microsoft Puerto Rico. In a pre-negotiated deal, Puerto Rico taxed these profits at just a 2% rate. 2
- Although 85% of Microsoft’s research is done in the United States, much of the profit from the research is sent to tax-haven countries.3 In 2011, Microsoft US sold the rights of its prized intellectual property to its subsidiaries in Ireland and Singapore. Through this manipulation of tax loopholes the company moved $8 billion in profit overseas, again avoiding U.S. taxes.4
- Microsoft has over $76 billion in profits stashed offshore, which cannot be taxed by the United States until brought back home. 5 In 2012, it had $60 billion in profits offshore, with an estimated U.S. tax bill of $19.4 billion, according to Citizens for Tax Justice.6
- Microsoft often complains that the United States corporate income tax rate is overly burdensome, but it paid an effective tax rate of only 13.4% in 2011. 7 Through complex tax avoidance schemes Microsoft lowered its tax bill to well under half the statutory corporate tax rate of 35%, according to Business Insider.
- Microsoft is part of numerous anti-tax coalitions and trade associations, including Tax Innovation Equality (TIE), the Business Roundtable (BRT), and Fix the Debt (FTD). TIE and the BRT aggressively lobby for lower corporate tax rates and a territorial tax system, and FTD has publicly supported these positions. A territorial tax system would give permanent tax amnesty for U.S. corporate profits earned or booked offshore, incentivizing corporations to send wealth and jobs overseas. If the United States adopts such a system it would create 800,000 jobs overseas, according to one estimate.8
1 U.S. Permanent Subcommittee on Investigations, “Exhibits for 9/20/12 Hearing on Offshore Profit Shifting and the U.S. Tax Code” (Sept. 20, 2012), p. 2. https://www.hsgac.senate.gov/subcommittees/investigations/hearings/offshore-profit-shifting-and-the-us-tax-code
2 Ibid., p. 21.
3 Ibid., p. 22.
4 U.S. Permanent Subcommittee on Investigations, “Statement of Senator Carl Levin (D-Mich) Before U.S. Senate Permanent Subcommittee on Investigations on Offshore Profit Shifting and the U.S. Tax Code” (Sept. 20, 2012), p. 2. http://www.hsgac.senate.gov/download/?id=31551efc-5f77-4e27-af5e- 4d590de662bdhttp://www.hsgac.senate.gov/download/?id=31551efc-5f77-4e27-af5e-4d590de662bd
5 Bloomberg BusinessWeek, “Microsoft, IBM Top List of U.S. Tech Firms with Biggest Overseas Profit Hauls” (August 13, 2013). http://www.businessweek.com/news/2013-08-13/microsoft-ibm-top-list-of-u-dot-s-dot-tech-firms-with-biggestoverseas-profit-hauls
6 Citizens for Tax Justice, “Apple is not Alone” (June 3, 2013). http://ctj.org/ctjreports/2013/06/apple_is_not_alone.php#.UgkfGJIsn-k
7 Business Insider, “It’s Not Just Apple: The Ultra-Complicated Tax Measures That Microsoft Uses To Avoid $2.4 Billion In U.S. Taxes” (May 21, 2013). http://www.businessinsider.com/apple-microsoft-avoids-taxes-loopholes-irs-2013-1
8 Kimberly A. Clausing, “A Challenging Time for International Tax Policy,” Tax Notes (July 16, 2012). http://taxprof.typepad.com/files/136tn0281.pdf