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September 20, 2012 in Economics
Microsoft and HP criticised by US Senate over tax havens
The US Senate has criticised Microsoft and Hewlett-Packard for their use of tax avoidance schemes, which it says is rampant in the tech sector.
The Senate’s Permanent Subcommittee on Investigations said the companies used places such as the Cayman Islands so they did not have to pay US taxes.
The chairman of the panel said their practices ranged from “egregious to dubious validity”.
Microsoft and HP denied any wrongdoing.
Carl Levin has been investigating offshore tax havens for years.
He said the industry was probably the number one user of these offshore entities to transfer intellectual property.
Five of the top 10 companies with the biggest offshore cash balances are in the technology sector.
The committee said that between 2009 and 2011, Microsoft moved $21bn offshore, almost half its US retail sales revenue.
The panel said the moved saved it up to $4.5bn in taxes on goods sold within the US.
It also said the company moves royalty revenue to divisions in lower-tax nations, including Singapore and the Republic of Ireland.
Microsoft’s vice president for tax, William Sample, said the main reasons for moving operations outside of the US was not tax, although he admitted they came into consideration: “While the primary objective of our regional structure is to improve our competitiveness and efficiency in each of the three regions, we evaluated available tax incentives.”
The panel said Hewlett-Packard funded US operations with inter-company loans, using an exception in the law for short-term loans, to avoid billions of dollars in taxes.
A spokesman for Hewlett-Packard said that the company complied fully with tax law adding that the Internal Revenue Service had never raised any concerns about the systems cited by the Senate panel.
HP spokesman Michael Thacker said: “We are disappointed to see what appears to be a politically motivated attack on one of America’s largest employers.”
The top Republican on the panel, Senator Tom Coburn, signed off the new report, but blamed Congress for the tax system that made such activities possible: “Tax avoidance is not illegal. Congress has created this situation.”
US corporation tax is one of the highest in the world at 35%.
Bill Gates top of Forbes rich list for 19th year
Technology titan Bill Gates has been listed by Forbes magazine as the wealthiest American for the 19th year in a row, with a fortune of $66bn , up $7bn from last year.
There was no change in the order of the top five richest from a year earlier.
The total wealth of the US super-rich grew 13% to $1.7tn, with the top 400 worth an average $400m more in 2012.
The group’s assets are worth as much as one eighth of the US economy, and grew much faster than the economy at large.
According to the Forbes 400 list of the richest people in America, the average net worth of a person on the list was $4.2bn.
In second place with a fortune of $46bn was investment guru Warren Buffett, who is chairman and chief executive of the insurance conglomerate Berkshire Hathaway.
He was followed by Larry Ellison, head of software maker Oracle Corp, worth $41bn.
David and Charles Koch of the energy and chemical business group Koch Industries were tied in fourth place with $31bn.
The majority of those on Forbes’ list became richer in 2012. Two hundred and forty-one members of the group saw their wealth increase, while just 66 saw it shrink.
Casino magnate Sheldon Adelson and financier George Soros dropped from the ranks of the top 10 into 12th place compared with a year ago.
But the biggest drop was seen by Facebook founder and chief executive, Mark Zuckerberg, who fell from 14th to 36th place in the wake of a disappointing stock market listing of his company.
He lost nearly half his fortune, which is now worth an estimated $9.4bn.
Four members of one family – the heirs to the Walmart fortune – are in the top 10.
Here is the Forbes list:
- Bill Gates, co-founder and chairman of Microsoft, $66bn
- Warren Buffett, chairman and chief executive of Berkshire Hathaway, $46bn
- Larry Ellison, co-founder and chief executive of Oracle, $41bn
- Charles Koch, chairman and chief executive of Koch Industries, $31bn
- David Koch, co-owner and executive vice-president of Koch Industries, $31bn
- Christy Walton & family, heiress to Walmart fortune, $27.9bn
- Jim Walton, heir to Walmart fortune and chairman of Arvest Bank, $26.8bn
- Alice Walton, heiress to Walmart fortune, $26.3bn
- S Robson Walton, heir to Walmart fortune, $26.1 billion
- Michael Bloomberg, founder and principal owner of Bloomberg LP