Technology giants Microsoft and HP used offshore units to shield billions of dollars from U.S. taxes by taking advantage of loopholes in the tax code, a U.S. Senate panel said on Thursday.
Describing tax avoidance as rampant in the technology sector, the Senate's Permanent Subcommittee on Investigations said tech companies used intellectual property, royalties and license fees in tax havens such as the Cayman Islands to skirt U.S. taxes.
"The high-tech industry is probably the No. 1 user of these offshore entities to transfer intellectual property," Senator Carl Levin, chairman of the panel, said at a news conference. "The tax practices and gimmicks range from egregious to dubious validity."
The investigative panel's findings came hours ahead of a hearing Thursday, at which Levin is slated to reveal further details and to take testimony.
Witnesses set to testify include tax executives from Microsoft and HP, a tax executive from Big Four accounting firm Ernst & Young , and senior officials from the U.S. Internal Revenue Service.
Levin has been investigating offshore tax evasion for years and often issues reports calling attention to the issue.
The committee said that from 2009 to 2011, Microsoft shifted $US21 billion offshore, almost half its U.S. retail sales revenue, saving up to $US4.5 billion in taxes on goods sold in the United States.
It also said the software giant shifts royalty revenue to units in lower-tax nations such as Singapore and Ireland, avoiding billions of dollars of additional taxes in the U.S.
A spokesman for Microsoft could not be reached for comment.
The panel said HP funded U.S. operations with a stream of intercompany loans, using an exception in the law for short-term loans, to avoid billions of dollars in taxes.
A spokesman for HP could not immediately be reached for comment.
Copyright Reuters. Click for restrictions.
Issue: 322 | December 2013
Access CRN's extensive online resources including; email bulletins, community discussions and unique online news.
Processing registration... Please wait.
This process can take up to a minute to complete.
A confirmation email has been sent to your email address - SUPPLIED GOES EMAIL HERE. Please click on the link in the email to verify your email address. You need to verify your email before you can log on to the CRN website or start posting comments on articles.
If you do not receive your confirmation email within the next few minutes, it may be because the email has been captured by a junk mail filter. Please ensure you add the domain '@crn.com.au' to your white-listed senders.