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You are here News Economy Microsoft's Use Of Lox-Tax Havens Drives Tax Bill To 7 Percent Of Profit

Microsoft's Use Of Lox-Tax Havens Drives Tax Bill To 7 Percent Of Profit

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Bill GatesThings were rosy in the giant software company's just-ended fiscal fourth quarter, which produced record sales of nearly $17.4 billion, a 30 percent increase in after-tax profit, and a 35 percent gain in earnings per share.

But for the Internal Revenue Service and foreign tax authorities, things weren't so rosy. Microsoft reported only $445 million in taxes in the U.S. and other foreign countries, just 7 percent of its $6.32 billion in pre-tax profit.

Given the rancor in Congress and in the country about how to tackle the nation's budget deficit and debt, including how companies stash profits overseas and enjoy lucrative tax breaks, it is instructive to see how the top brass at Microsoft's Redmond, Washington, headquarters achieved this eye-popping tax result.

Partly it was because the company had a one-time refund of $461 million from the IRS for previous overpayments and because of its over-estimation of tax rates in previous quarters. There may be increased sales of products to consumers overseas, though it is not clear from company disclosures how much of a factor this might be.

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