Dear Commons Community,

Technology giants Microsoft Corp and Hewlett-Packard Co used offshore units to shield billions of dollars from U.S. taxes by taking advantage of loopholes and stretching the limits of the tax code, a U.S. Senate panel led by Senator Carl Levin said on Thursday.

Describing tax avoidance as rampant in the technology sector, the Senate’s Permanent Subcommittee on Investigations said tech companies used intellectual property, royalties and license fees in tax havens such as the Cayman Islands to skirt U.S. taxes.

NBC News reported:

“The panel subpoenaed internal documents from the companies and interviewed Microsoft and HP officials to compile its report, and uses them as case studies.

“The tax practices and gimmicks range from egregious to dubious validity,” Sen. Carl Levin, chairman of the panel, said at a news conference.

Officials at HP and Microsoft strongly denied any wrongdoing.

The investigative panel’s findings came hours ahead of a hearing Thursday, at which Levin is slated to reveal further details and to take testimony.

Levin, a Democrat, has been investigating offshore tax evasion for years and often issues reports calling attention to the issue. But Senator Tom Coburn, the ranking Republican on the panel, also signed onto the report.

U.S. companies have about $1.5 trillion in profits sitting offshore, and most say they are keeping it there to avoid U.S. tax. Of the top 10 companies with the biggest offshore cash balances, five are in the technology sector.

“The high-tech industry is probably the No. 1 user of these offshore entities to transfer intellectual property,” Levin said.

The committee said that from 2009 to 2011, Microsoft shifted $21 billion offshore, almost half its U.S. retail sales revenue, saving up to $4.5 billion in taxes on goods sold in the United States.

This was accomplished, the panel report said, by aggressive transfer pricing, where companies put values on intercompany movement of assets. Units are supposed to use a fair market price to value such transfers, but critics say they are undervalued to minimize tax.

The report also said the software giant shifts royalty revenue to units in lower-tax nations such as Singapore and Ireland, avoiding billions of dollars of additional taxes in the U.S.

Sen. Carl Levin is accusing tech giants Microsoft and Hewlett Packard of using complex, legally questionable strategies to avoid paying billions of dollars in U.S. taxes.

The companies say they’re not doing anything wrong – and a top committee Republican says the real problem is the tax code that Congress created.”

It is incredible that companies like Microsoft are allowed to operate this way.  Maybe the Bill and Melinda Gates Foundation should start a new grant program focusing on ethics and reforming corporate America.

Tony

Dear Commons Community,

Paul Krugman in his New York Times column, explores the Republican Party’s “disdain” for workers.  Citing recent comments from the Party’s leaders such as Eric Cantor and Mitt Romney, he dices and slices Republican infatuation with “job creators”.  For example:

“…the fact is that the modern Republican Party just doesn’t have much respect for people who work for other people, no matter how faithfully and well they do their jobs. All the party’s affection is reserved for “job creators,” a k a employers and investors. Leading figures in the party find it hard even to pretend to have any regard for ordinary working families — who, it goes without saying, make up the vast majority of Americans.

Am I exaggerating? Consider the Twitter message sent out by Eric Cantor, the Republican House majority leader, on Labor Day — a holiday that specifically celebrates America’s workers. Here’s what it said, in its entirety: “Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success.” Yes, on a day set aside to honor workers, all Mr. Cantor could bring himself to do was praise their bosses.

Lest you think that this was just a personal slip, consider Mr. Romney’s acceptance speech at the Republican National Convention. What did he have to say about American workers? Actually, nothing: the words “worker” or “workers” never passed his lips. This was in strong contrast to President Obama’s convention speech a week later, which put a lot of emphasis on workers — especially, of course, but not only, workers who benefited from the auto bailout.

And when Mr. Romney waxed rhapsodic about the opportunities America offered to immigrants, he declared that they came in pursuit of “freedom to build a business.” What about those who came here not to found businesses, but simply to make an honest living? Not worth mentioning.”

Krugman concludes:

“… it reflects the extent to which the G.O.P. has been taken over by an Ayn Rand-type vision of society, in which a handful of heroic businessmen are responsible for all economic good, while the rest of us are just along for the ride.

In the eyes of those who share this vision, the wealthy deserve special treatment, and not just in the form of low taxes. They must also receive respect, indeed deference, at all times…

The point is that what people are now calling the Boca Moment wasn’t some trivial gaffe. It was a window into the true attitudes of what has become a party of the wealthy, by the wealthy, and for the wealthy, a party that considers the rest of us unworthy of even a pretense of respect.”

Dr. Krugman is right on!!!

Tony