Microsoft: tax avoider

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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 (MSFTFortune 500) and Hewlett-Packard (HPQFortune 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.