Our disappearing corporate taxes

An Saoi: Stand up and take a bow, the tax team of Microsoft Inc! You managed to reduce the effective corporate tax rate to just 17.53% for the year ended 30th June 2011 from 25% in the year ended 30th June 2010. This reduction saved the company $2,097M or $0.247 a share of the $0.60 increase in income per share. You have therefore contributed 41% of the increase in net income. I hope that Mr. Ballmer remembers you all at bonus time for your stakhanovite efforts on his behalf.

Let us not forget the helping hand of their Irish advisors KPMG for their consistently top class advice. This reduction in the effective rate was managed despite an increase of 25% in your headline Irish tax rate from 10% to 12.5%. Microsoft’s Irish operations account for between a quarter and a third of worldwide sales so Dutch sandwiches and Bermudan barbeques seem to be heavily on the menu.

It is a pity that Ireland seems to have been one of the countries that suffered at the hands of your new found ueber-aggressiveness where tax planning is concerned. I thought our May corporate tax figures were very low and it seems that you have now provided a good deal of the answer. You have of course protected most of your Irish operations, leaving just one company open to public scrutiny.

Historically, Microsoft was not an overly aggressive tax planner. The 2009 effective rate was 26.5% and 2008 slightly lower at 25.75%. Deferral seemed to be the name of the game rather than the over the top activities of Google. However corporate pressure seems to have changed the rules and you certainly have done your bit for earnings per share.

What is left for Ireland? Very little it seems. A few bones will continue be thrown from the table to the lazy dog lying underneath. But when the dog wakes he may find that all he is left with is an itch from some unwelcome visitors. Perhaps it was Microsoft that M. Sarkozy had in mind when he spoke about tax theft. Who would blame him for kicking such a lazy flea infested dog?

Posted in: Taxation

Tagged with: corporationtax