Richard Murphy talks about Microsoft’s latest attempts to hide its tax avoidance schemes from public scrutiny, referring to an article in FinFacts. Richard believes – and with some justification – that the scale of tax avoidance could not be sanctioned without Bill Gates knowledge. More like Steve Ballmer in my view but let’s not split hairs.
The wider issue is that Microsoft isn’t just parking profits in Ireland – it’s parking cash as well – $4.1 billion according to the report. If true then those funds are not available for the purpose stated:
“As part of our strategy to facilitate and support future business growth, Microsoft is re-organising some of its legal entities within the group.”
Unless of course those funds are then re-routed elsewhere – say India as ‘investment funds?’ In turn, those funds cannot be made directly available to stockholders for dividend or stock repurchase purposes without Microsoft triggering a tax charge in the US.
Microsoft will no doubt say that $4.1 billion out of a cash pile exceeding $35 billion is a relatively small amount of money. True – but it’s still locked up, even if the accumulated net tax saving exceeds $1 billion. Any of you Wall Street analysts thinking about this? Why not ask Microsoft to bite the bullet and give those funds back to shareholders? Anything else doesn’t make logical business sense and would do much to revive their flagging stock price fortunes.
Ironically – if you look at the difference in effective tax rates based on the most recent published statements - it is roughly the same as the amount Microsoft is facing in EU fines – at the moment.
Postscript: Any readers thinking about Microsoft as a ‘value’ play should perhaps remember that in order to milk the cash cow, the cow has to be willing to give up the milk. Otherwise, you stand a good chance of being kicked off the milking stool.
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