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When Former Microsoft Employees Turn Against Microsoft

Posted in Finance, Microsoft at 2:18 pm by Dr. Roy Schestowitz


Summary: Thoughts and questions to one who protests against Microsoft’s tax dodge

NOW that there are worldwide protests against corporate dodging of tax it seems like a good opportunity to recall what Microsoft does all around the world to just vacuum some money while giving nothing in return.

Our past articles about this serious issue help accumulate examples that include convictions. Microsoft was not always able to change the law to legalise what is essentially tax evasion. One former employee of Microsoft studied what Microsoft had done politically and then charged his former bosses. In his latest post he corrects what he calls a “wrong” banner and points out that “[i]n 2010, the Legislature changed the state’s Royalty Tax in Microsoft’s favor. The change was led by (wait for it) former Microsoft executive Ross Hunter, Democratic Chair of the Finance committee. The Royalty Tax used to be a .484%* tax on worldwide revenue from software licensing. Microsoft claimed its licensing revenue from its Alter Ego corporate sub-identity in Nevada to avoid the tax. It saved between $1.51 billion and $6.1 billion depending on how you calculate it. However, Hunter changed the tax so the Royalty Tax is now apportioned. The tax now only applies to sales to Washington State customers (not worldwide revenues).”

How is what legal? Well, when a company’s cronies write the law, everything is possible. Here is another new example of Microsoft’s hypocrisy:

TechFlash reports that Microsoft’s General Counsel Brad Smith has called for the Governor to end cuts to higher education and is supportive of an increase to our state’s sales tax. Microsoft loves the sales tax because it’s a regressive tax – meaning that the poor pay a higher percent of their income in taxes than the rich:

“People earning less than $20,000 annually pay 17.3 percent of family income toward sales and excise taxes and property taxes, the report said. People making between $99,000 and $198,000 each year pay 7.6 percent toward their tax bill. Meanwhill, people in the top 1 percent of earners – those making more than $537,000 a year – pay just 2.9 percent, the report said.”

The Institute for Taxation and Economic Policy (ITEP) reports that Washington State already has the most regressive tax structure in the country.

If it weren’t for Microsoft’s Nevada Tax Dodge and its lobbying effort, Washington State wouldn’t have a budget deficit right now. We’ll be updating our reporting on this soon (our earlier summary is here).

This is not the only example of such hypocrisy. Bill Gates and his father need not pay tax because they pretend to run a (for-profit and PR) charity, which exempts them for it while they lobby for more tax burden on the rich, excluding themselves of course. The press misreports this all the time because the PR machine of Bill is hard at work.

Techrights was trying to get an interview with the former Microsoft employee who understands the tax dodge very well. I prepared the following questions, but have not received a response yet. The questions were:

- Could you please start by explaining the tax dodge scenario and the political situation that enables it?

- Is there someone in the political system that facilitates or guards Microsoft’s practices of tax dodging?

- Have you managed to get in direct contact with officials that have a conflict of interest to explain?

- Have any Microsoft executives been contacted by you or the press to explain or to justify what they are doing?

- Are you familiar with Ireland’s status as a tax haven for Microsoft’s European presence? Is that similar to what Microsoft is doing in the United States?

- Did you find Seattle’s media forthcoming when approached to give coverage to this problem?

- What do you perceive as the best course of action to address this issue?

- Is the raising of public awareness sufficient for change? Are petitions or formal complaints fruitful based on your experience?

We would still like to have those questions answered as they would help shed light on what those who dedicated their entire activism to this issue can educate us best and help address the injustice — essentially the robbing of the American public for a few billionaires to get even richer.

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A Single Comment

  1. Michael said,

    November 27, 2011 at 6:27 pm


    Once again you show your bias. Yeah, MS is evil for playing tax games. But somehow you ignore this:


    Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.
    Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.

    That is right, Google does the same thing – except more. They paid the lowest percentage of the top five biggest tech companies. Sounds like your favorite company, Google, is also “robbing the American Public for a few billionaires to get even richer”.

    Frankly, this is a topic you could write an interesting story about: the US tax system is insane and allows for massive amounts of wealthfare. But your obsession over Microsoft has lead you to just whine about one company and pretend they are doing something uncommon.

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