9 ms·

Microsoft Has Nearly $93B in Overseas Cash

45 points by cl8ton 12y ago

hkmurakami 12y ago
As usual, this is the key takeaway, imo: "None of this is illegal. Far from it. A corporation owes it to its shareholders to keep its tax bill as small as possible."
- StavrosK 12y ago
  I wonder if there's "tax evasion as a service". Register for the service, pass all your income to that company, get paid as its employee at a much smaller tax rate than your country. I think that some countries make that impossible for physical persons, though.
  - seanmcdirmid 12y ago
    It is not tax evasion; this money has probably already been taxed at least once. But the USA is very unique in making tax claims on world-wide income, so if the tax rate abroad is lower than the tax rate at home, you are supposed to pay the difference when you move the money back (the converse isn't true, however).
    - byroot 12y ago
      It might be true for some of it, but all these companies are well known for using european tax codes loopholes[0] and pay little to no tax on this money [0] http://en.wikipedia.org/wiki/Double_Irish_arrangement http://en.wikipedia.org/wiki/Double_Irish_arrangement
      - joelrunyon 12y ago
        It's still not tax evasion.
      - hkmurakami 12y ago
        iirc there was also something called the Dutch Sandwich that was recently made unavailable.
    - StavrosK 12y ago
      Sorry, s/evasion/minimization/.
    - dredmorbius 12y ago
      Relying on the exceptionally thin cover that an action is technically not illegal because it's in conformance with the laws you've paid to have written and passed with the wealth you're hoarding by way of those very laws is not a very intelligent line of reasoning to pursue. The art of legal and financial manipulation to socialize losses, privatize profits, to artificially move transactions to jurisdictions with favorable tax laws, and then lobby for eventual tax holidays to allow for tax-free repatriation of those funds may fall within the techncial gloss of "legal". It's not moral, ethical, fair, nor economically or democratically defensible.
      - dredmorbius 12y ago
        Self-reply: Having watched votes on this comment bounce around quite a bit over the past few hours, I'm curious as to just what it is that seems to engender a fairly strong split of opinion on what I've written here.
  - joelrunyon 12y ago
    It's not tax evasion.
  - deleted 12y ago
    [deleted]
- seanmcdirmid 12y ago
  And all of that money was earned overseas. It is up to the company to repatriate it or throw it back into overseas operations. This is kind of fair: if say Germans pay money to buy Windows, why not use some of the profit there in Germany rather than bringing back to the states?
  - Rapzid 12y ago
    Because it wasn't earned overseas in the way you're suggesting. It was "earned" overseas. Often companies route sales through overseas shell companies. See the StarBucks debacle in the UK. Microsoft's explanation of them being a "global" company is BS. They will wait for a corporate tax holiday to bring it back at a much reduced rate, or a chunk of it at almost no rate.
    - seanmcdirmid 12y ago
      > It was "earned" overseas. I work for Microsoft in Beijing doing R&D; I disagree and am kind of offended by your assessment.
    - philrapo 12y ago
      what about all the copies of windows in use in non-US countries? Those arent considered global?
      - Rapzid 12y ago
        Right, and do you need to create a company in Ireland to sell copies of Windows in France? The money is most certainly funnelled into a select few "companies" set-up in very specific countries. This is classic big business accounting and perfectly legal. It's also utter BS to spin it any other way than trying to avoid paying taxes on the money.
  - bilbo0s 12y ago
    This makes sense to me. If you make this money overseas... shouldn't you use the money in whatever nation you made it in to make that nation better ???? I think people who talk about taxes really miss this point. Because the taxes talk is all predicated on a foregone conclusion that bringing money to the US is the best thing you can do for shareholders. I'm not sure that's true.
- InclinedPlane 12y ago
  Much of this is a consequence of the silly high corporate tax rates in the US, which are among the highest (by a huge margin) in the developed world. In my opinion you could solve a lot of silliness by just harmonizing the corporate taxes/income taxes/capital gains taxes.
- aaronbrethorst 12y ago
  I am a shareholder in Microsoft who disagrees very strongly with this.
ronnier 12y ago
>Apple reported it had $137.7 billion in offshore accounts. The CTJ report also found that Cisco had $48 billion, HP had $38 billion, Google nearly $39 billion, and Oracle $26 billion offshore
cpursley 12y ago
This is a good case why the US should lower corporate taxes to a rate that is competitive with other jurisdictions, or just get rid of them all-together. Corporations don't actually pay taxes even when they do; it's the consumers who pay for them in the form of increased prices (tax is just passed on as an expense). Better to collect the tax at time of sale (VAT) - perhaps on a sliding scale.
- rgbrenner 12y ago
  Corporations don't actually pay taxes even when they do; it's the consumers who pay for them in the form of increased prices. This assumes that prices are directly linked to cost of goods sold, and that firms have no pricing power whatsoever. Now, if every firm sold commodities, perhaps that would be true.. But firms do have some pricing power through vendor lock-in, the degree to which their product is differentiated from competitors, etc. In Microsoft's case (for Windows, Office, and other products) there are no alternatives consumers are willing to switch to, and the price is not based on COGS, so a decrease in corporate taxes would only pad Microsoft's bank accounts. Edit: shortened for clarity
  - skrebbel 12y ago
    > In Microsoft's case (for Windows, Office, and other products) there are no alternatives consumers are willing to switch to Woa woa, when did you last visit a computer shop? OSX is a very viable alternative to Windows and consumers are very much willing to switch to it.
    - niels_olson 12y ago
      Turns out twenty-somethings in the City are an extreme minority. Huge amounts of mfst lock-in comes from the enterprise world. To move work between work and home virtually requires Office. I fought it for years until my IRB got delayed because the tables "didn't look right". At some point, $100 is worth less than just getting the damn research started.
    - xiaoma 12y ago
dataminer 12y ago
Is it possible for shareholders to force corporations to repatriate money back to US?
- tedunangst 12y ago
  Within reason. They can elect a board who will tell the CEO to tell the CFO to make it so. This would probably require some sort of Icahn style activist investor shakeup to take place.
- ayrx 12y ago
  What incentives do shareholders have for doing this? How does getting a company to bring money back to the US and paying taxes on it benefit them?
  - tedunangst 12y ago
    Dividends.
nlh 12y ago
I know this is oversimplified and there are unintended consequences I haven't considered, but: Seems like a tax holiday, structured with the right incentives (ie X% must be invested in US-based stuff .. Real estate, jobs, etc.) would be a win for everyone. Politicians get an economic stimulus that doesn't directly cost taxpayers money from the budget/treasury, and the companies get to bring back that foreign $$ at a reduced rate.
- rgbrenner 12y ago
  No, it wouldn't be a win for everyone. What it's really saying is that once every decade or so, large companies that do not immediately need capital during that period, are free to repatriate their earnings at a reduced rate. Meanwhile, smaller companies and companies that are less profitable (and need those funds to stay in business) are forced to repatriate funds at a higher/normal rate. And that difference amounts to a subsidy to large established multinational businesses OR a surcharge to their smaller competitors (depending on how you want to look at it). If the rates are so high that we need a tax holiday, then they are simply too high, and need to be lowered or restructured.
- deleted 12y ago
  [deleted]
zzleeper 12y ago
Don't they have to bring it back at some point if they want to pay that as dividends? (i.e. if the shareholders want that money?) Or are they counting on an eventual tax break on repatriations?
- Danieru 12y ago
  Or acquire overseas companies. Microsoft has already done this with Skype.
djloche 12y ago
Perhaps this is another incentive to start/incorporate companies in countries where larger companies have large cash piles and low taxes where a higher priced acquisition might happen compared to what would happen in the United States. I'm not sure, but Skype could be a good example here.
mikehc 12y ago
LOLed at Tim Cook's photo on the article.
ryandrake 12y ago
I wish I could use the same shenanigans that these companies get away with using to avoid paying their taxes. I could just imagine my conversation with the IRS: "No, no, no, IRS, you don't understand! My employer didn't hire me. They hired my fictitious doppleganger who lives in the Bahamas, where there's no income tax. I license my name and know-how to him for a monthly fee. My invisible clone then does all the work remotely and earns the pay check. But, since we're really the same person, he should be able to transfer those earnings here to me tax free! Why should I have to wait for a tax holiday to use all this money? It's so unfair!!!" These companies pulling this B.S. need to man up and pay their taxes like the rest of us.
- tartuffe78 12y ago
  If you lived in a different country for 3 months of every year, and you had a job, dual-citizenship, and bank account there, would you bring your money back to the US every time you came back so that the IRS could have their share? Or would you wait to spend it the next time you were away?
  - brightsize 12y ago
    In the US we (individuals) pay taxes on our worldwide incomes. You'll have to file with the IRS every year and claim this income. There's no need to "bring your money back" for the IRS to get its share.

45 points by cl8ton 12y ago

As usual, this is the key takeaway, imo: "None of this is illegal. Far from it. A corporation owes it to its shareholders to keep its tax bill as small as possible."

StavrosK 12y ago
I wonder if there's "tax evasion as a service". Register for the service, pass all your income to that company, get paid as its employee at a much smaller tax rate than your country. I think that some countries make that impossible for physical persons, though.
- seanmcdirmid 12y ago
  It is not tax evasion; this money has probably already been taxed at least once. But the USA is very unique in making tax claims on world-wide income, so if the tax rate abroad is lower than the tax rate at home, you are supposed to pay the difference when you move the money back (the converse isn't true, however).
  - byroot 12y ago
    It might be true for some of it, but all these companies are well known for using european tax codes loopholes[0] and pay little to no tax on this money [0] http://en.wikipedia.org/wiki/Double_Irish_arrangement http://en.wikipedia.org/wiki/Double_Irish_arrangement
    - joelrunyon 12y ago
      It's still not tax evasion.
    - hkmurakami 12y ago
      iirc there was also something called the Dutch Sandwich that was recently made unavailable.
  - StavrosK 12y ago
    Sorry, s/evasion/minimization/.
  - dredmorbius 12y ago
    Relying on the exceptionally thin cover that an action is technically not illegal because it's in conformance with the laws you've paid to have written and passed with the wealth you're hoarding by way of those very laws is not a very intelligent line of reasoning to pursue. The art of legal and financial manipulation to socialize losses, privatize profits, to artificially move transactions to jurisdictions with favorable tax laws, and then lobby for eventual tax holidays to allow for tax-free repatriation of those funds may fall within the techncial gloss of "legal". It's not moral, ethical, fair, nor economically or democratically defensible.
    - dredmorbius 12y ago
      Self-reply: Having watched votes on this comment bounce around quite a bit over the past few hours, I'm curious as to just what it is that seems to engender a fairly strong split of opinion on what I've written here.
- joelrunyon 12y ago
  It's not tax evasion.
- deleted 12y ago
  [deleted]
seanmcdirmid 12y ago
And all of that money was earned overseas. It is up to the company to repatriate it or throw it back into overseas operations. This is kind of fair: if say Germans pay money to buy Windows, why not use some of the profit there in Germany rather than bringing back to the states?
- Rapzid 12y ago
  Because it wasn't earned overseas in the way you're suggesting. It was "earned" overseas. Often companies route sales through overseas shell companies. See the StarBucks debacle in the UK. Microsoft's explanation of them being a "global" company is BS. They will wait for a corporate tax holiday to bring it back at a much reduced rate, or a chunk of it at almost no rate.
  - seanmcdirmid 12y ago
    > It was "earned" overseas. I work for Microsoft in Beijing doing R&D; I disagree and am kind of offended by your assessment.
  - philrapo 12y ago
    what about all the copies of windows in use in non-US countries? Those arent considered global?
    - Rapzid 12y ago
      Right, and do you need to create a company in Ireland to sell copies of Windows in France? The money is most certainly funnelled into a select few "companies" set-up in very specific countries. This is classic big business accounting and perfectly legal. It's also utter BS to spin it any other way than trying to avoid paying taxes on the money.
- bilbo0s 12y ago
  This makes sense to me. If you make this money overseas... shouldn't you use the money in whatever nation you made it in to make that nation better ???? I think people who talk about taxes really miss this point. Because the taxes talk is all predicated on a foregone conclusion that bringing money to the US is the best thing you can do for shareholders. I'm not sure that's true.
InclinedPlane 12y ago
Much of this is a consequence of the silly high corporate tax rates in the US, which are among the highest (by a huge margin) in the developed world. In my opinion you could solve a lot of silliness by just harmonizing the corporate taxes/income taxes/capital gains taxes.
aaronbrethorst 12y ago
I am a shareholder in Microsoft who disagrees very strongly with this.

ronnier 12y ago

>Apple reported it had $137.7 billion in offshore accounts. The CTJ report also found that Cisco had $48 billion, HP had $38 billion, Google nearly $39 billion, and Oracle $26 billion offshore

cpursley 12y ago

This is a good case why the US should lower corporate taxes to a rate that is competitive with other jurisdictions, or just get rid of them all-together. Corporations don't actually pay taxes even when they do; it's the consumers who pay for them in the form of increased prices (tax is just passed on as an expense). Better to collect the tax at time of sale (VAT) - perhaps on a sliding scale.

rgbrenner 12y ago
Corporations don't actually pay taxes even when they do; it's the consumers who pay for them in the form of increased prices. This assumes that prices are directly linked to cost of goods sold, and that firms have no pricing power whatsoever. Now, if every firm sold commodities, perhaps that would be true.. But firms do have some pricing power through vendor lock-in, the degree to which their product is differentiated from competitors, etc. In Microsoft's case (for Windows, Office, and other products) there are no alternatives consumers are willing to switch to, and the price is not based on COGS, so a decrease in corporate taxes would only pad Microsoft's bank accounts. Edit: shortened for clarity
- skrebbel 12y ago
  > In Microsoft's case (for Windows, Office, and other products) there are no alternatives consumers are willing to switch to Woa woa, when did you last visit a computer shop? OSX is a very viable alternative to Windows and consumers are very much willing to switch to it.
  - niels_olson 12y ago
    Turns out twenty-somethings in the City are an extreme minority. Huge amounts of mfst lock-in comes from the enterprise world. To move work between work and home virtually requires Office. I fought it for years until my IRB got delayed because the tables "didn't look right". At some point, $100 is worth less than just getting the damn research started.
  - xiaoma 12y ago

dataminer 12y ago

Is it possible for shareholders to force corporations to repatriate money back to US?

tedunangst 12y ago
Within reason. They can elect a board who will tell the CEO to tell the CFO to make it so. This would probably require some sort of Icahn style activist investor shakeup to take place.
ayrx 12y ago
What incentives do shareholders have for doing this? How does getting a company to bring money back to the US and paying taxes on it benefit them?
- tedunangst 12y ago
  Dividends.

nlh 12y ago

I know this is oversimplified and there are unintended consequences I haven't considered, but: Seems like a tax holiday, structured with the right incentives (ie X% must be invested in US-based stuff .. Real estate, jobs, etc.) would be a win for everyone. Politicians get an economic stimulus that doesn't directly cost taxpayers money from the budget/treasury, and the companies get to bring back that foreign $$ at a reduced rate.

rgbrenner 12y ago
No, it wouldn't be a win for everyone. What it's really saying is that once every decade or so, large companies that do not immediately need capital during that period, are free to repatriate their earnings at a reduced rate. Meanwhile, smaller companies and companies that are less profitable (and need those funds to stay in business) are forced to repatriate funds at a higher/normal rate. And that difference amounts to a subsidy to large established multinational businesses OR a surcharge to their smaller competitors (depending on how you want to look at it). If the rates are so high that we need a tax holiday, then they are simply too high, and need to be lowered or restructured.
deleted 12y ago
[deleted]

zzleeper 12y ago

Don't they have to bring it back at some point if they want to pay that as dividends? (i.e. if the shareholders want that money?) Or are they counting on an eventual tax break on repatriations?

Danieru 12y ago
Or acquire overseas companies. Microsoft has already done this with Skype.

djloche 12y ago

Perhaps this is another incentive to start/incorporate companies in countries where larger companies have large cash piles and low taxes where a higher priced acquisition might happen compared to what would happen in the United States. I'm not sure, but Skype could be a good example here.

mikehc 12y ago

LOLed at Tim Cook's photo on the article.

ryandrake 12y ago

I wish I could use the same shenanigans that these companies get away with using to avoid paying their taxes. I could just imagine my conversation with the IRS: "No, no, no, IRS, you don't understand! My employer didn't hire me. They hired my fictitious doppleganger who lives in the Bahamas, where there's no income tax. I license my name and know-how to him for a monthly fee. My invisible clone then does all the work remotely and earns the pay check. But, since we're really the same person, he should be able to transfer those earnings here to me tax free! Why should I have to wait for a tax holiday to use all this money? It's so unfair!!!" These companies pulling this B.S. need to man up and pay their taxes like the rest of us.

tartuffe78 12y ago
If you lived in a different country for 3 months of every year, and you had a job, dual-citizenship, and bank account there, would you bring your money back to the US every time you came back so that the IRS could have their share? Or would you wait to spend it the next time you were away?
- brightsize 12y ago
  In the US we (individuals) pay taxes on our worldwide incomes. You'll have to file with the IRS every year and claim this income. There's no need to "bring your money back" for the IRS to get its share.