Recently, Citizens for Tax Justice published a report on American Fortune 500 corporations are likely saving about $550 billion by holding nearly $2 trillion of “permanently reinvested” profits offshore. All these US companies are using Tax Havens outside the US to have their cash reserves. Microsoft has now over $92.9 billion outside the US which if brought inside would cost them about $29 billion. Microsoft is not alone in this case, Apple has over 138 billion, Cisco has over $48 billion, Google has over $39 billion.
In the recent regulatory filing, Microsoft noted the following cash reserves,
As of June 30, 2014, we have not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences of approximately $92.9 billion resulting from earnings for certain non-U.S. subsidiaries which are permanently reinvested outside the U.S. The unrecognized deferred tax liability associated with these temporary differences was approximately $29.6 billion at June 30, 2014. Income taxes paid were $5.5 billion, $3.9 billion, and $3.5 billion in fiscal years 2014, 2013, and 2012, respectively.
Microsoft pointed out the following response regarding this issue,
Microsoft’s tax results follow from its business, which is fundamentally a global business that requires us to operate in foreign markets in order to compete and grow. In conducting our business at home and abroad, we abide by U.S. and foreign tax laws as written. That is not to say that the rules cannot be improved–to the contrary, we believe they can and should be.
In our view, the U.S. international tax rules are outdated and are not competitive with the tax systems of our major trading partners. These rules all too often provide a disincentive for U.S. investment.
CTJ concluded their report with the following message,
The limited disclosures made by Apple and a handful of other Fortune 500 corporations show that they have moved profits into tax havens — and that some have managed to avoid virtually all taxes on these profits. But the scope of this tax avoidance is likely much larger, since the vast majority of Fortune 500 companies with offshore cash refuse to disclose how much tax they would pay on repatriating their offshore profits.
Lawmakers should resist calls for tax changes, such as repatriation holidays or a territorial tax system, that would reward U.S. companies for shifting their profits to tax havens. If the Securities and Exchange Commission required more complete disclosure about multinationals’ offshore profits, it would become obvious that Congress should end deferral, thereby eliminating the incentive for multinationals to shift their profits offshore once and for all.
Read more about it in detail from the below links.