Senator blasts Microsoft for tax dodge

One U.S. Senator calls it a “sham” the way Microsoft and other multinational corporations avoid paying billions of dollars in U.S. taxes.

At a Senate hearing, Microsoft and Hewlett Packard were cited for the way they shift profits offshore, including money made selling products in the U.S. In the case of Microsoft, a Senate report claims the Redmond company sold intellectual property rights to overseas business partners and profits from subsequent sales of Microsoft products were taxed at lower rates charged by foreign governments.

The strategy is legal under U.S. tax law but Michigan Democrat Carl Levin says the “gimmicks” add to the budget deficit and burden ordinary Americans. A Senate report claims Microsoft avoided paying almost $7 billion in taxes over three years.

Microsoft says it complies with an exceedingly complex tax structure and Levin does not accuse the company of acting illegally.

One expert says the problem is not with Microsoft, pointing out that the U.S. has among the highest corporate tax rates in the world, which encourages multinational companies to exploit tax laws.