A recent article published by the Associated Press discusses a Senate report, regarding the discovery of tax evasion (amounting to billions of dollars) by many multinational companies, including Microsoft Corp. and Hewlett-Packard. The companies are accused of moving profits offshore, in order to avoid paying US taxes.
The Senate Permanent Subcommittee on Investigations released the report, documenting specific multinational companies as the culprits. The AP article stated that Microsoft was one company, which the Senate examined exhaustively: “In one example, the report said that the Washington state-based software giant saved $4.5 billion in taxes from 2009 to 2011 by shifting assets to Puerto Rico, a U.S. commonwealth that offers numerous tax breaks to businesses.”
The companies who were accused of tax evasion claimed the allegations against them were false, and they may not have been lying. According to AP, “US-based companies can avoid taxes on much money earned abroad by asserting that they have invested those funds offshore or plan to do so.”
It seems that multinationals can simply dismiss paying taxes on money earned overseas simply by promising to invest those funds offshore. How is it so easy for these powerful multinational companies to go about doing this? What does this say about the tax code in the US?