Microsoft Will Move More Employees Offshore if Obama Proposals Pass

Bill Gates

The Times of India reports on how Microsoft will move employees offshore if President Obama’s plan to outlaw tax breaks for offshore companies passes:

US tax rules let companies defer paying corporate rates as high as 35 per cent on most types of foreign profits as long as that money remains invested overseas. Obama says he wants to end such incentives to keep foreign profits tax-deferred so that companies would invest them in the US. While the rules were designed in 1997 to protect US companies from paying excessive tax to other governments, Obama administration officials say it has evolved into a way to duck US liabilities.

“It makes US jobs more expensive,” Steve Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the US as opposed to keeping them inside the US.”

Altering the rule, which Obama dubbed a “loophole,” would generate $86.5 billion in new revenue by 2019, the administration says. Obama has said his proposals would protect or create jobs in the United States.

(Symantec CEO John W.) Thompson called the Obama proposals “counterintuitive” to the administration’s other stated goals of fostering an innovation-oriented economy. “It is a little bit ironic that most of our most significant trading partners and partners globally have taken the tack that they’ll reduce corporate tax rates to stimulate economic growth and not raise corporate tax rates,” Thompson said.

Ballmer said that, while the Obama proposals would preserve expense deductions related to research and experimentation costs, the overall deduction limits for companies that defer tax on foreign profits would raise the cost of employing US workers. Fiduciary responsibility to shareholders would require Microsoft to cut costs, he said, meaning many jobs would be moved out of the country.

Obama also needs to propose reducing the corporate tax rate at home. Otherwise, companies have no incentive to stay here.

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Written by Drea Knufken

Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.