Way back in 2005 I was involved in the first ever story on Microsoft's tax dodging.
In 2012 they're still doing it. As CNN has reported:
Microsoft has saved nearly $7 billion off its U.S. tax bill since 2009 by using loopholes to shift profits offshore, a Senate panel said in a report released Thursday.
The Permanent Subcommittee on Investigations reviewed tax loopholes used by dozens of companies in the high-tech industry to shift profits offshore. But it focused on moves by Microsoft (MSFT, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500), according to Sen. Carl Levin, the Michigan Democrat who runs the panel.The Senate investigation, which included subpoenas and voluntary correspondence with the companies, provided an in-depth look into how the companies set up and use overseas tax shelters, as well as the impact on government coffers.
Levin acknowledged that Microsoft has broken no laws. But he blamed a loose tax code, Congress and tax officials for allowing the loopholes.
"The tax practices and gimmicks range from egregious to dubious validity," Levin said. "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."
In the case of Microsoft, the company transferred nearly half of its net revenue from U.S. retail sales to a Puerto Rican subsidiary between 2009 and 2011. That saved the firm $4.5 billion in U.S. taxes, according to the panel.
And the Irish ruse I was involved in exposing in 2005 continues, of course.
I agree with Levin's comments.
But think of this another way. Bill Gates has given billions to charity. I acknowledge the philanthropy. But it's fair to ask how much of that philanthropy was possible because his company avoided tax? And to ask how much good might have been done if that tax had been paid?
It's a strange world where we grant power and status to those who secure influence with government based at least in part on the ability of their companies to not pay the right amount of tax in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
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Can’t really anyone boycotting Microsoft in protest though, can you?
I do my best these days
Of course you can.
Try to understnad how your computer works, learn linux and install it. Millions of people use it and never use Microsoft again.
Go and see http://www.ubuntu.com for an example of what free software can do for you.
And before you say that it’s for geeks and experts, know that the French Assembly uses it for all its MPS.
It’s a fair question about the Gates Foundation (and one you could just as well ask of Bono).
Part of the answer is tied up in how much of Microsoft Bill still owns or controls. From what I understand he is still (non-executive) chairman and owns about 6% of the stock (the largest individual shareholder), but he gave up being CEO in June 2008. So he doesn’t have an awful lot of control over its operations.
But part of it, I suspect, is also the geek in him saying “it’s OK to do it, because I can do it”. If you look at the sort of things he got up to as a kid – finding bugs in operating systems and exploiting them to get free computer access, writing programs to schedule high-school classes that put him in with a large number of girls – you can see the pattern. Because he was Microsoft for so long, it is not entirely surprising that the company went looking for tax loopholes. It is interesting to see that Apple, Google, Amazon and HP – all companies stacked full of geeks – are all similar in this respect to MS.
And yet… there is a significant contradiction. Gates set his first charitable trust up in 1994, long before you broke the tax dodging story. The Gates trust is reputedly transparent about what it gives and to whom. There might be something in the geek ethos of “it’s OK because I can do it” in the way the trust runs – having seen how intergovernmental initiatives like the UN’s 0.7% take forever to get anywhere, Gates reckons that his gains, ill-gotten or otherwise, can get a result faster and cheaper. (And to be honest, he might be right).
On the substantive question: yes, as CEO in 2005 he would have to hold up his hands to the “Double Irish” (was it the Double Irish and Dutch Sandwich?). I think you cannot directly blame him for the Puerto Rican dodge Sen Levin is talking about, but there is, of course, the question of company culture (and that could take decades to turn around).
But on the whole I think that Bill Gates is not fundamentally an evil man: flawed certainly – but not beyond redemption. Someone with the intelligence and wealth Gates has could destroy the earth if he chose, and what I see says that is not his choice – unlike, say, Bob Diamond, a man who apparently has no moral compass whatsoever.
Fair comment
But if he’s serious time to say to Microsoft “change your ways”
He has the power to do that
If he doesn’t the flaw is pretty big, and perpetuated by choice