US Senator Proposes Bill to Block Microsoft’s Tax Dodging Scheme

The Stop Tax Haven Abuse Act could block companies from using loopholes in the tax code

It’s no secret that tech giants such as Microsoft are using loopholes in the US tax code to avoid paying millions of dollars in taxes, but these schemes could soon come to an end if a recently proposed act gets the green light.

US Senator Carl Levin has created a new bill in September called the “Stop Tax Have Abuse Act” that blocks companies selling products in the United States from dodging taxes and thus hurting the local economy.

Basically, the bill is trying to close two tax loopholes that many companies, including Microsoft, are using to channel US sales to several offshores, some of which are based in Ireland and other countries that have become tax havens for large corporations.

“This bill eliminates incentives to send U.S. profits and jobs offshore, combats offshore tax abuses, and raises revenues needed to fund our national security and essential domestic programs. Its provisions could be part of an alternative deficit reduction package to substitute for sequestration this year, but should be adopted in any event because the loopholes we would close serve no economic purpose and shouldn’t exist even if there were no deficit,” Senator Levin explained.

In 2011 for example, Microsoft avoided paying no less than $4.5 billion (€3.2 billion) in US income taxes using offshores based elsewhere, the Senator added. If the bill gets approved, it could help raise a total of $23 billion (€16.8 billion) in revenue in only 10 years.

“In total, over a three-year period, Microsoft used its transfer pricing gimmick to avoid paying $4.5 billion in U.S. corporate income taxes, or $4 million in taxes per day. Think about that. Microsoft products are developed here. They are sold here, to customers here. And yet Microsoft paid no taxes here on nearly half of its U.S. sales income, because current U.S. tax law allowed Microsoft to send that money offshore and defer indefinitely paying U.S. taxes on it,” the Senator said about Microsoft’s tax dodging scheme.

Microsoft is yet to issue a statement on this, but the last time the company was accused of using offshores to skirt millions in taxes, the company’s executives actually became edgy and defensive.

“Through our employment, compensation, and purchases of U.S. goods and services, Microsoft's operations supported roughly 462,000 U.S. jobs. In Washington State specifically, Microsoft has been the single largest contributor to economic growth since 1990; our impact on the state accounted for 32.4 percent of the total gain in state employment,” Microsoft said in a statement in 2012.

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