How Microsoft Structured Acquisition Of Skype To Avoid U.S. Taxes

[JBeukema]

As the Wall Street Journal’s Ronald Barusch notes, Microsoft and Skype saved billions of dollars in taxes because Microsoft used its foreign profits to purchase Skype, which also happens to base its corporate headquarters in a major tax haven itself, Luxembourg. Doing so allowed Microsoft to avoid paying taxes on its profits at the U.S. corporate tax rate of 35 percent. So how much does Microsoft pay on the profits it makes overseas in tax havens based in places like Ireland, Bermuda, and Singapore? To find the answer, we can turn to the University of Southern California’s Edward D. Kleinbard. In a paper titled “Stateless Income,” Kleinbard analyzed Microsoft’s overseas earnings. Kleinbard noted that in 2010, Microsoft has $29.5 billion in earnings overseas, and that the tax cost of these earnings if they were brought back to the U.S. would be $9.2 billion:

For example, Microsoft Corporation’s Financial Statements in its 2010 Annual Report indicated that the company has $29.5 billion in “permanently reinvested earnings” outside the United States (that is, after foreign-tax earnings of foreign subsidiaries that Microsoft does not currently intend to repatriate to the United States). Microsoft also noted that the tax cost of repatriating those earnings to the United States would be $9.2 billion.
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ThinkProgress » Microsoft Structured Acquisition Of Skype To Avoid U.S. Taxes

 

[boedicca]

And Bill Gates pushes an agenda for the upper middle class to pay even higher tax rates.

Anyone see a connection?