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."
"None of this is illegal. Far from it. A corporation owes it to its shareholders to keep its tax bill as small as possible."
I work for Microsoft in Beijing doing R&D; I disagree and am kind of offended by your assessment.
However:
1) while it's true that good part of the actual work has been done in the U.S., great part of the value comes from the effort (marketing, sales, R&D, ...) that happens in the subsidiaries; it's not easy to quantify, but certainly those people are actually doing something, aren't they?
2) as far as I understood, the U.S. income tax is not paid until that money gets back to the U.S. In fact it stays abroad, deferring the tax payment. The subsidiary could use that money to invest and expand the foreign market, with indirect but substantial domestic benefits.
I believe the issue of tax loophole in the country where the actual subsidiary works, is a different matter; but I don't understand what's the problem per-se with having stashes of oversea money held by a foreign subsidiary of your company.
It's hard to know what's right, especially in a global marketplace. But this is certainly a good option.
Is Hackernews USA only? Some of these posts are confusing, like everyone is posting from and about the states.
This particular cash is not doing anything productive for any economy, except of generating interest and a bit of taxes upon it.
Shit, it'd be really interesting to see what would happen if MS/AAPL got the possibility to transfer their entire overseas cash into the US without taxes. Probably 100B$ could provide a massive growth...
No, the better solution (for America) is to also allow more immigration of tech workers to the US, who can be employed using that repatriated cash. Then those tech workers will create all kinds of service sector jobs that unemployed Americans can work in.
-- a U.S. customer bought software written in the U.S. in a U.S. store and used it in the U.S.
-- "Microsoft US" paid "Microsoft Tax Dodge Inc." a fat fee for the use of the "Microsoft" name, which it had previously sold to "Microsoft Tax Dodge Inc."
-- as a result of these two transactions, no profit was earned in the U.S. but a large profit was "earned overseas"
-- curiously, the particular place where the profit was "earned overseas" does not tax foreign income, meaning no tax will ever be paid on this profit "earned overseas"
This is a definition of "earned overseas" that only a tax accountant would agree with.
http://en.wikipedia.org/wiki/Double_Irish_arrangement
Microsoft is - after finagling - showing billions of dollars in annual profits in a Bermuda subsidiary consisting of some paperwork in a lawyer's office. (And they are far from the only offender.) No, this isn't because Microsoft is selling billions of dollars worth of MSOffice in Bermuda.
http://www.businessweek.com/articles/2014-03-20/companies-of...
Edit: if you want to point out something that does, feel free, but don't sling mud without.
Microsoft is so notorious for their abuse that they're attracting congressional reports on the issue:
http://www.businessinsider.com/apple-microsoft-avoids-taxes-...
In my opinion you could solve a lot of silliness by just harmonizing the corporate taxes/income taxes/capital gains taxes.
I think that some countries make that impossible for physical persons, though.
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.