Microsoft

Senator Carl Levin, Raised questions earlier today regarding taxes for tech companies. He specifically pointed to low tax rates, and the large foreign cash holdings of tech companies. We wanted to do a brief follow-up on the topic, based on statement sent to us by Microsoft Corporation (NASDAQ:MSFT).

Microsoft Corporation (NASDAQ:MSFT) notes:

Microsoft has a complex business and we must comply with the complicated tax code of the United States, resulting in an exceedingly complex tax structure.  That is why we’ve advocated for reforms to simplify the US tax code and make it more competitive with the rest of the world.

Microsoft is correct that tax policy is confusing and does favor holding cash overseas. That is why many other tech companies also have a far lower tax rate.

Below is Microsoft’s statement followed by their testimony submitted to the US Senate today.

Microsoft has a complex business and we must comply with the complicated tax code of the United States, resulting in an exceedingly complex tax structure.  That is why we’ve advocated for reforms to simplify the US tax code and make it more competitive with the rest of the world.

One of the business imperatives faced by Microsoft and many US-based businesses today is that we must operate in foreign markets in order to compete and succeed as a company.  Foreign revenue growth helps support the growth of our U.S. operations, creating additional U.S. jobs and supporting an economic ripple effect that leads to greater growth in local communities.  Our foreign growth has allowed Microsoft to increase our footprint in the U.S.

According to a recent study of Microsoft’s economic impact, we increased our employment by 13.2 percent in the United States from 2007 and 2009.  Through our employment, compensation, and purchases of U.S. goods and services, Microsoft’s operations supported roughly 462,000 U.S. jobs.  In Washington State specifically, Microsoft has been the single largest contributor to economic growth since 1990; our impact on the state accounted for 32.4 percent of the total gain in state employment.

To compete and grow, we operate a global business that requires us to operate in foreign markets.  In conducting our business at home and abroad, we abide by U.S. and foreign tax laws.  That is not to say that the rules cannot be improved–to the contrary, we believe they can and should be.  US international tax rules are outdated and not competitive with the tax systems of our major trading partners.  We believe the US should reform its tax rules to support the ability of worldwide American businesses to compete in global markets and invest in the US.

Bill Sample of Microsoft’s written testimony from the hearing below:

STMT – SAMPLE-William J (Microsoft)(Sept 20 2012)