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Former Microsoft manager engineers tax break

Mates rates
Tue Feb 16 2010, 10:12

IT SEEMS THAT old loyalties carry a lot of weight for a former Microsoft manager who entered politics.

Facing a $2.8 billion deficit and pending insolvency, Washington State's House of Representatives has pending Bill 3176, which mysteriously proposes changes to the state B&O royalty tax that would give Microsoft an estimated $100 million tax cut annually and possible amnesty for more than a billion dollars in alleged past tax evasion.

Under current state law the Vole has to declare all of its worldwide licensing revenues of approximately $20.7 billion annually, which are taxable at 0.484 per cent and that amounts to $100.1 million. Under the proposed new law, only the portion of software licenses actually sold to punters in Washington state would be taxable, perhaps resulting in less than a million dollars annually in royalty tax due from the company.

So why is the State of Washington suddenly being so generous to Microsoft? Well, a blog has pointed out that the Bill 3176 sponsor is State Representative Ross Hunter, who represents Medina, home to Bill Gates and a number of other current and former Microsoft billionaires and multi-millionaires, and other areas around Microsoft's corporate campus. However the relationship goes a bit deeper than that. Hunter was also a general manager at Microsoft, so it would appear that he is doing his old mates a big favour.

The software giant has not paid the state much in the royalty taxes for quite a while. Since 1997, Microsoft has avoided an estimated $1.27 billion in royalty taxes, interest and penalties by operating a small office in Nevada to account for royalty revenue from software licensing.

While the shy and retiring Microsoft CEO Steve Ballmer claims that the Vole honours its local communities by providing transparency in its business practices he doesn't say much about the company's Nevada tax dodge.

Although Bill Gates is launching a sterling effort to educate Africa's poor, Washington state's own education system is fast running out of cash and that royalty tax money from Microsoft would help it swimmingly. But it doesn't look like the state is going to get it, thanks to Ross Hunter. µ


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