

How Microsoft keeps taxes down by using tax havens - cwan
http://www.techflash.com/seattle/2011/07/microsofts-tax-haven.html

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ZoFreX
Bit strange to mention Microsoft 17 times when you'll find offices in Dublin
for Google, IBM, Apple... anyone who's anyone. This is far from specific to
Microsoft yet the article is for the most part very targeted. Google from
memory boosted their earnings last year by something like 20% by tax avoidance
(or whatever the correct term for completely legal tax-dodging is).

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IanDrake
>Without the tax holiday, the companies would have to pay a hefty tax to use
the money in the U.S. to invest in hiring or to pay shareholder dividends and
stock buybacks.

At the end of the day, the big problem here is that it's beneficial for these
companies to leave their money outside the US. That money doesn't get spent
inside the US and therefor ultimately doesn't help our economy.

Sadly, congress will probably enact some draconian measure that will cause
even more harm then good to "solve" this problem. To them the problem is lost
tax revenue, when the real problem is lost domestic prosperity.

Change the law to tax their oversea's profit like states tax income. For
example, let's say MA is 5%, CT is 6% and you earn salary in MA, but live in
CT then you essentially pay MA 5% and CT 1%.

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rprasad
That actually is how we tax international income. The issue is that nation-
level taxes are in the double-digit ranges (i.e., 35% or above), so crediting
foreign income taxes against US income taxes still results in a 35% (base)
rate.

Indeed, ignored in all this discussion (ignorantly by the media, deliberately
by the companies), is that intercorporate dividends from EU countries to/from
NAFTA countries are tax-free (or mostly tax-free), in the sense that they are
taxed only once at the corporate level, as income to the payor. If the
recipient distributes the dividends onwards to its own shareholders, it is
taxed as income to those shareholders at lowered rates.

These companies aren't planning to use their worldwide earnings to hire. If
they were, the tax rates wouldn't matter _because they get dollar-for-dollar
deductions_ for such expenses (except for executive compensation), and
intercorporate dividends they received or which they pass on to corporate
shareholders are tax-free (or mostly tax-free) because of the dividends
received deduction.

