From M$’s last SEC filing:
“NOTE 11 INCOME TAXES
Our effective tax rates were approximately 21% and 25% for the three months ended September 30, 2011 and 2010, respectively. Our effective tax rate was lower than the U.S. federal statutory rate and our prior yearâ€™s first quarter effective rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico, which are subject to lower income tax rates.
Tax contingencies and other tax liabilities were $7.5 billion and $7.4 billion as of September 30, 2011 and June 30, 2011, respectively, and are included in other long-term liabilities. While we settled a portion of the I.R.S. audit for tax years 2004 to 2006 during the third quarter of fiscal year 2011, we remain under audit for these years. During the fourth quarter of fiscal year 2011, the I.R.S. completed its examination and issued a Revenue Agentâ€™s Report (â€œRARâ€) for the remaining unresolved items. We do not agree with the adjustments in the RAR, and we have filed a protest to initiate the administrative appeals process. The proposed adjustments are primarily related to transfer pricing and could have a significant impact on our financial statements if not resolved favorably. We do not believe it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months, as we do not believe the appeals process will be concluded within the next 12 months. We also continue to be subject to examination by the I.R.S. for tax years 2007 to 2011.”
I am not an accountant, tax-man or any sort of expert on these matters but the plain language implies that M$ is not paying US taxes on revenue obtained in other parts of the world. That is reasonable if the product being sold was DVDs etc., but M$ is in the business of selling licences to “intellectual property” which originates in the USA. M$ appears to be taking a tax deduction on the “R&D” done in the USA but dodging revenue obtained elsewhere. Is there a fiction that for BSA’s purposes, “Intellectual Property” is valuable everywhere but for tax purposes, that property flows elsewhere for $0 and is sold for a handsome profit overseas? M$, in its prime, paid no income tax whatsoever and half of M$’s huge nest egg of $60billion is overseas. The liabilities could be huge.
I can see why the US tax-men need to audit M$ but I don’t see why they are apparently so many years behind. Has the darling of capitalists been getting a free ride at ordinary tax-payers’ expense? The quarterly report lists tax contingencies at $7billion+.
Al Capone was an organized criminal, who, in spite of diverse criminal activity even murder was eventually brought to justice by the tax-men. Wouldn’t it be sweet if that is eventually M$’s downfall? Paying their fair share for the operation of the government that protected M$ from competition would be some form of justice although just a drop in the bucket of their ill-gotten gains. It would be better if some of their leadership did jail-time for tax evasion.
In reality, the harm done to the USA by M$ is much larger than the tax liabilities. Re-re-reboots alone in the USA probably amount to a dozen or more per PC per annum. Then there are attacks by malware, stifling competition, waste of perfectly good PCs on the Wintel conveyor-belt to the dump, high prices, and now the patent-trolling. It’s high time the USA quit drinking M$’s Koolaid. Canada and the rest of the world should do the same. I recommend Debian GNU/Linux as a refreshing replacement for that other OS. It works for you and not for M$.