Monday, May 16, 2011

Corporate taxes make Skype deal logical for Microsoft

(Controlled Foreign Corporations (CFC's) and local self serving Puerto Rico's political leaders have successfully lobbied so that the US Territory of Puerto Rico is considered "foreign" for US IRS tax purposes. The "foreign trapped cash" is in US $$$ and is stashed in PR's FDIC local Banks. Their massive lobbying power makes sure that Puerto Rico's status is kept unresolved so as to protect their interests. MJ)

Business Sense column 
Date published: 5/15/2011
By Bill Freehling

CRITICS who have panned Microsoft's $8.5 billion purchase of Skype may be basing their analysis on the wrong price tag. It's true the software giant announced this past week that it will pay $8.5 billion for Skype, which offers web-based phone and video communication services. But when looked at from Microsoft's perspective, the real cost of the deal is much less. And that perspective has important implications for U.S. tax policy.

Microsoft recently announced that it had a whopping $50 billion in cash at the end of the first quarter. But $42 billion of that total was held overseas. The cash parked overseas was earned by Microsoft's substantial international business operations. Like other companies, Microsoft doesn't have to pay U.S. corporate taxes on the earnings of foreign subsidiaries unless it "repatriates" the funds into the U.S.