In the United States, the non-payment of taxes is seen by the authorities as one of the infuriating offenses against the government. Individuals who evade taxes are labeled as criminals, even before being tried in a court of law. Those who speak against taxation without representation are equaled to crazy people or conspiracy theorists.
But when it comes to corporate taxation, the tables always turn in favor of the non payers. Corporations such as Facebook, Google, Apple and Microsoft are some of the best known offenders. These corporations are successful in evading the payment of taxes thanks to loopholes left open in tax legislation that allows them to — with a sea of legal tricks — move their profits overseas in order to avoid payment. This is the conclusion of a new U.S. Senate subcommittee report.
One of the latest cases is that of Bill Gates’ Microsoft. The technology giant avoided paying $4.5 billion in taxes between 2009 and 2011. Microsoft managed to send some $21 billion in profits abroad, which allowed the company to evade the payment of taxes that otherwise would have been collected by the American Internal Revenue Service. The billions of dollars not paid by Microsoft corresponded to taxes on the sales the company had during two complete years according to report by the Senate investigations subcommittee of the U.S. Congress.
Similar methods to avoid paying sales taxes have been used by other large corporations, reports the Huffington Post. Apple, for example, earned around $45 billion in 2011, but paid only $3 billion in taxes. That is because the company creates subsidiaries in cities known as ‘tax heavens’ where corporate taxes are 0%. Apple also manages to complete sales of digital products from foreign countries, so when the company sells a song or software, the payment is made to subsidiaries in Luxemburg, and not in the U.S..
Other companies like Google and HP also succeeded in avoiding corporate taxes in the last few years. While Apple avoided taxes on $34.5 billion between 2009 and 2011, Google dodged taxes on $24 billion. Hewlett-Packard, used what the congressional report calls a number of revolving short-term loans with its subsidiaries to avoid paying billions of dollars in taxes since 2008. Congressman Carl Levin said HP kept billions of dollars in cash outside of the United States — $17 billion in 2010 — that it lent to its U.S. headquarters to avoid paying taxes on that money.
As shown above, the case of Microsoft is not unique. That is what those who prepared the report believe and that is what their conclusions seem to suggest. They also examine how multinationals transferred their operations to countries where taxation is more favorable. By the way, they do it legally, which shows how weak the tax code is in the United States when it comes to holding corporations accountable for their share of the tax burden.
The opposite is true for individuals, who do not enjoy the tax loopholes that corporations like Microsoft have to send money outside of the U.S.. In fact, the U.S. government announced changes in the tax code to prevent individuals from moving their savings or investment gains abroad. Nothing was prepared to do the same on the corporate side.
The non payment of corporate tax goes around every year in the U.S. Congress, but it has been even more relevant this year due to the American need to find cash to finance its out of control government spending, which in turn ran up the deficit. In the case of these technology firms, they’ve used intellectual property rights, royalties and licensing as ways to avoid accountability.
Microsoft has said it does do anything irregular and highlighted the complex structure of the American tax system. The company also says it has been very accommodating with the congressional investigation. Senator Carl Levin, however, believes that the practices used by Microsoft are at least “questionable”.
According to the newspaper El País, the amount shuffled in the Microsoft case corresponds to about half of its sales in the U.S.. That money, says the Spanish newspaper, is often sent to other countries such as Ireland. In the United States congressional investigations and initiatives that seek to curb the non payment of corporate taxes usually end in nothing. Although both Republicans and Democrats agree that something needs to be done, they cannot agree on the way Congress should approach the closing of loopholes to avoid that companies like HP and Cisco Systems manage to get away without paying taxes in the U.S..
“At a time when difficult budget decisions are being made, while families face tax increases and spending cuts in critical public programs in education and health, these situation is unacceptable” said Levin.
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Contributed by Luis Miranda of The Real Agenda.
Luis R. Miranda is the Founder and Editor of The Real Agenda. His 16 years of experience in Journalism include television, radio, print and Internet news. Luis obtained his Journalism degree from Universidad Latina de Costa Rica, where he graduated in Mass Media Communication in 1998. He also holds a Bachelor’s Degree in Broadcasting from Montclair State University in New Jersey. Among his most distinguished interviews are: Costa Rican President Jose Maria Figueres and James Hansen from NASA Space Goddard Institute.