Wow what a tax bill

[PATAX]

I just read that the IRS said that Microsoft owes it approximately 29 BILLION dollars.

[Jim-from-Ohio]

they must have so much cash as the stock market basically considered it a non-issue

[IRonMaN · Accepted solution]

I just Googled the deal and kind of shook my head:

 'ProPublica and Fortune reported in 2020 that the tech giant had moved "at least $39 billion in U.S. profits" to Puerto Rico in an effort to avoid taxes.  Accountant KPMG had arranged a tax rate close to 0% with the local authorities, the report said.    '

I wonder what kind of tax rates KPMG could arrange for me if I gave them a call 🤔

As a side note, I was attending a CPE class several years ago and one of the speakers was a former KPMG employee.  He mentioned that he used to work for KPMG before they became a radio station.  That line always stuck with me 😁

[BobKamman]

Microsoft pays its lawyers a lot more than IRS pays its lawyers.  Also, the Microsoft lawyers probably get stock options.  Can you imagine if the US government issued options, what they would be worth these days?  

[PATAX]

@BobKamman @IRonMaN @Jim-from-Ohio if they do actually owe this then I hope the IRS does not reach a bargain agreement with them, and I hope they make them pay back every single penny, i.e. I'm tired of this nonsense. Everyone should pay their fair share of taxes, from the poorest to the wealthiest.

[BobKamman]

I just read the ProPublica story and found that

" IRS set out to be bolder and more aggressive. It took the unusual step of hiring a corporate law firm to represent the agency, a step that incensed Microsoft. The company, along with others in its industry, responded by rallying allies in Congress to rein in the IRS."

Private lawyers make a lot more per hour than government lawyers, and probably Microsoft is using some of those also (rather than in-house employees with stock options and other incentives).  But this case is far from being decided, and there is nothing for Microsoft to "pay back" because the issue is whether it should have paid more when the return was filed. 

The $29 billion is a drop in the bucket compared to what American global enterprises have saved by shifting their profits to low-tax jurisdictions like Ireland.  There are efforts being made to close this loophole with the "global minimum tax."  Republicans, of course, are opposed.  So maybe their leader's tombstone will read, "He was a lecherous narcissist but he kept the price of Windows down."

[PATAX]

@BobKamman yeah that's what I meant: pay what they should have paid. Thanks for that information on Ireland. Now I know why a couple of my stocks that my broker put me in are companies based in Ireland.

[sjrcpa]

@PATAX  Apple?

[BobKamman]

It's not companies based in Ireland, it's just those who claim they have located their intangible assets (like software and patents) there. IT and pharmaceutical companies accounted for the vast majority of the corporation tax paid in Ireland in 2021. The best known of those is Apple, which has said it is Ireland’s largest taxpayer.

[PATAX]

@sjrcpa I didn't know about Apple, and I'm not sure if he has me in that, I think he does. The one company that is in Ireland I think it's name is Medtronics, but I'm not sure, as I'm out here in the countryside with Heidi. Another company he has me in is Chubb, I think they're based in Switzerland and sell insurance. He is a top-notch broker and he only invests in about 25 or so stocks that I have seen, because some of my clients go to him and I see this. He's actually done better for me than American Funds.

[BobKamman]

@PATAX If you like IRS going after Microsoft while investing in Medtronic, I see a pot calling the kettle black.   From Wikipedia:

In June 2014, Medtronic announced it would execute a tax inversion to Ireland by acquiring Irish-based Covidien (a previous U.S. tax inversion to Ireland in 2007), for $42.9 billion in cash and stock. The tax inversion enabled Medtronic to move its legal headquarters to Ireland, while maintaining its operational and executive headquarters in the U.S., thus allowing it to avoid taxation on more than $14 billion held overseas, and avail of Ireland's beneficial low corporation tax regime. Medtronic's tax inversion is the largest tax inversion in history, and given the changes in the U.S. tax-code in 2016 to block the Pfizer-Allergan Irish tax inversion, is likely to remain the largest. Medtronic CEO Omar Ishrak defended the tax inversion in a 2015 interview to the Financial Times saying, "We just followed the rules and the deal was done based on strategic merits". Ireland is less than 0.1% of Medtronic (or Covidien) sales, and the majority of Medtronic's sales, and an even greater percentage of Medtronic profits (due to the higher margins on U.S. medical devices), are from the U.S. healthcare system. In 2016, the Star Tribune reported that Medtronic was still winning U.S. Federal contracts and attending U.S. trade-missions as a U.S. company.

[PATAX]

@BobKamman thanks I did not know that. My broker makes those decisions about buying and selling. I don't say anything, he is the best so I let him do what he wants to do. If you try to manage your own stock Investments, then this does not always work out well, and then you end up selling when you should be holding and so forth.