Ballmer clashes with Obama over US tax rules Microsoft boss Steve Ballmer has threatened to move more US jobs overseas if President Barack Obama refuses to change his stance on ending tax breaks on foreign earnings. Big Steve told Bloomberg yesterday that US tax rates made jobs “more expensive.” "We’re better off taking lots of people and moving them out of the US as …
Mr Ballmer, take ALL the Microsoft jobs and move them to china. Then we can stuff a heavy import tariff on them and never have to deal with that POS you call an operating system again.
flame on fanbois.
all kidding aside, remember when "made in [insert your country here]" actually meant something (good or bad, it meant something). Now it's just a shipping label, everything is equally craptastic, no matter where it is made.
I totally understand the global economy thing, but telling your workforce that they are unemployed because you found someone who lives in a mud and twigs hut that will do their job for bag of crisps and a bonus biscuit, thereby increasing their profit margin is just wrong.
Companies invest in off shoring capabilities not just because of the cheap labor, but because of the loopholes in the current tax system. As long as the money stays off shore, the companies don't have to pay taxes on it until they bring the money on shore. That is, they can potentially hide profits made on revenue streams outside of the US until they need to use the money.
Obama is doing the right thing. If you are going to 'globalize' your workforce, you need to globalize your tax code and remove the incentives to level the playing fields. Microsoft, IBM, Accenture, CSC, etc.. will have to rethink their business models.
Note that the US also will go after corporations that relocate their corporate HQs outside of the US if only to dodge US taxes.
So unless Microsoft or any other company wants to no longer do business in the US, they will have to rethink their business practices. Now if only the EU also takes this stance will we find some normalcy.
Oh and tying this to the BT article about 'internal transfers' ... add jail time to the penalties and you'll see it stop very quickly.
Thumbs up because finally a government official is starting to look at the long term picture. With respect to Obama, the short term picture looks like crap so he can afford to take a stance.
I'd also add the devil symbol since Balmer is taking Bill's place as the 'antiChrist'.
I was going to leave a comment but Mike Tahylor and Ian Michael Gumby have said almost all that needs to be said. Not quite all however...
If I was Microsoft, I would relocate to the Congo or Rwanda and hire gorillas. Appearances indicate that their software was written by apes anyway.
Lest we forget, Microsoft was a big donator to the Bush campaign because Bush supported the ending of the anti-trust lawsuit against them. (They also did the trick of making a token donation to the Democrats so they could pretend to be even handed).
So thank Microsoft for the US economy as it now stands, thank you Ballmer for your selfish f*ckwittery that destroyed America.
Right now, the US can't pay it's way, taxes need to be raised and spending needs to be cut. The Federal Reserve is reduced to buying the government debt and monetizing it. Bernanke is warning Congress to balance the budgets.
http://www.bloomberg.com/apps/news?pid=20602007&sid=aLErlU5KrcfY&refer=govt_bonds
Meanwhile Ballmer still wants free money to build bridges connecting his offices while refusing to pay taxes.
A number of US companies, especially in the financial services sector, are making profits selling services in other countries. Pretty much the only gains Citi made last year were in Asia. StanChart operates solely in the emerging markets but is headquartered in London (I doubt they have a branch in London - only their head office).
If Citi reinvests its Asian profits in expanding to countries outside the US, say Eastern Europe or Africa or South America, I don't quite see why they should pay a tax to the US.
If this keeps up, these companies will have to divest their overseas assets or move out of the US. Can you imagine Citi surviving on its US business alone?
Hedge funds that are still alive are thinking of moving out of London fearing the EU regulations (currently in draft). I hear of new funds being set up in Geneva and Singapore, even Australia - but not London.
It won't be long before companies move out of the US, to Ireland / Hong Kong / Singapore... Ballmer is just adding a different perspective to the debate. I expect his patriotism will soon be questioned and senior management of large corporations will be the target for the next wave of McCarthyism...
Infact I think they're OK, they're just doing what's best for their shareholders but in respect to all this offshoring I totally agree with Michael Gumby.
Moving all the engineering and manufacturing jobs offshore is killing our economies and giving huge power to the far east that WILL come back to bite us in the ass. The same way as exploiting the Middle East in the past for it's oil is now coming back to hurt us.
The truth is that America/Western governments are only interested in the corporations (you can't blame them, they're liable to no-one but their shareholders) run by the very rich in the west and having been acting in their people's interests at all, trying to sell us the BS story that globalisation is good and if you speak out against it then you're a xenophobe racist.
Finally it took the people of America using their own money to actually get a President elected that will act in their interests. Unfortunately there's no chance of that happening due to the parliamentary system that is totally run by special interest groups and MPs on the make.
>If I was Microsoft, I would relocate to the Congo or Rwanda and hire gorillas. Appearances indicate that their software was written by apes anyway
I think that's over stating it somewhat - Gorillas are one of the brighter ape species, it's not fair to ask them to dumb-down to an MS level.
As much as it is fun demonize Ballmer and MicroSloth, they are not the cause of the U.S. recession. That job was done by (in order of blame):
(1) the American people - who signed for mortgages they couldn't afford, bought second houses, took the equity out of their houses and pissed it off. They also bought cars and trucks that were destined to be unaffordable once the price of oil went high enough..which it clearly was going to do once less developed nations decided they wished to be developed.
(2) the banks, capital markets, and Wall Street - who designed debt instruments even they didn't understand. They also managed to sever the link between investment and risk, and also produced "financial instruments" that turned a profit if some part of the economy failed.
(3) Business School Product - who thought running a company didn't mean one needed to actually know the company's products (the kind of understanding an engineeri has by designing them). And who also decided that shipping production, product development, and research to China was a wise decision.
(4) Government regulators - who forgot that the "free" in "free market" means freedom of entry and exit, not freedom from government laws designed to keep freedom of entry and exit, thus promoting the establishment of monopolies and oligarchies.
(5) Speed and efficiency - the push for speed and efficiency meant that the global economic system is so tight that a problem in one part gets immediately translated into other parts with no time lag, no buffering, no looseness.
The chances of doing the right thing might be increased if the US didn't assume that the only correct way to pay taxes is the way the IRS sees it. (I stands for inland, not international).
The European position is clear, every country stands by its own tax laws, which encourages competition. This is not really a position, more a muddle.
Corporate tax laws needs fixing accross countries at the same time as personal tax havens, otherwise millionaires will only turn themselves into companies.
The tax havens' also have a position, that they are keeping the monopolistic tax authorities honest. Well, its a position.
On the one hand when companies like Microsoft want to move jobs overseas because it is cheaper and they can avoid tax, it is a global market.
But if you want to buy copies of Windows in South America (because they are cheaper) and then resell them in Europe suddenly it isn't and you should be prosecuted.
Wankers.
M$ even qualified for tax credits and received money back from the feds in the 90's, even thought they had record profits.
I guess anything to make a keep a buck. They still keep losing anti trust issues in europe even though we americans aren't pursuing it. At least there is somewhere to go.
If Mr Ballmer could somehow cash in his little paper pot, ( What is is now about $35bn? ), I'm sure that would be a reasonable boost to the US economy.
Once again, mega-rich corp, doesn't want to play by the rules, so head start throwing toys out his pram. Grow up Ballmer, the world economy, that's us normal people with piss-poor pensions and next to worthless savings, is in a bloody awful state and a world leader has the guts to try to sort something out without simply blowing hot air.
Shut up Steve!
" As much as it is fun demonize Ballmer and MicroSloth, they are not the cause of the U.S. recession. That job was done by (in order of blame):"
No, it was absolutely done by spending more money than raised in taxes and monetizing the difference. That created a lot of cash, if it didn't flow into ultra cheap mortgages it would have run elsewhere and you'd be blaming someone else.
Microsoft backed Bush for purely selfish reasons and they share part of the blame.
Now Ballmer wants free stimulus money without paying taxes. Typical.
Currently if a US company has a subsidiary overseas any profits that subsidiary makes are taxed in the country is it based in. If the profit is then moved back to the USA it is also taxed in the US.
What Obama wants to do is make it so that any profit that subsidiary makes will be immediately taxed in both the country it is in and in the USA.
How would you like to pay the full income tax on your wages in two different places? Because that is what they want to do to companies.
Is causing US multinationals to have a tax bill that is around twice what they would have to pay if they move the HQ overseas really a good idea in the long run?
Mike Tahylor: companies are not in business to employ people, that's just a nice side-effect.
Ian Michael Gumby: companies were moving off-shore to avoid US taxes. US taxes have now gone up. What happens next?
Anonymous Coward: BUSH LIED PEOPLE DIED!!!! enough.....
John Owens: Obama president naaaaaaow. But he's still not paying my mortgage! What happened?
Wonko the Sane: The current US recession was caused by excessive taxes on executive compensation, which caused stock options to replace salaries, which caused executives to focus on short-term financial gains over long-term planning, which caused.....
John: I have the worlds smallest cello. One more and we're a trio.
Camelfoe
... Ballmer's right on this one.
If you make money overseas, keep it overseas, invest it overseas, and use it overseas, you should pay taxes on that money to the overseas authorities.
And, for the sake of argument, let's say Ballmer does relocate all of Microsoft's HQ and Product Development offices from Redmond to a more tech-company-friendly country, like Ireland (i.e., Windows, Office, etc. would be wholly developed, authored, tested, and licensed for sale from within that country). The import tarrifs Microsoft would have to pay to the US could conceivably be quite a bit less than the additional income tax burden Obama is trying to push onto multinational companies.
I'm an admitted Linux fanboy, but every once in a great while the folks at M$ do make sense...
Of course, Microsoft could move to Mexico, and ship to the US and Canada and pay zip in tarrifs because of NAFTA. They'd probably have to pay quite a bit to the local Cartels for "protection," though...
"Hedge funds that are still alive are thinking of moving out of London fearing the EU regulations (currently in draft). I hear of new funds being set up in Geneva and Singapore, even Australia - but not London."
Good, fuck off and don't come back, I really couldn't give a flying one if some overpaid City oiks lose their jobs.
- "Can you imagine" Corporation X "surviving on its US business alone?"
No, and that's the point. Corporations are getting too big for the Capitalist theory. Globalization makes a mockery of supply and demand economics because goods flow from eight different countries, through four different shipping companies, to six different retail chains - but the goods never leave MegaCorp XYZ's subsidiaries? If a company's vertical markets are competing against each other, lowering prices, etc. who wins? When your customers are your employees, where do they get money to keep buying when you lay them off?
Who wins? Everybody loses except those at the rarified heights of the corporatocracy. Geesh, they make money when the company goes under just from the insurance payments... from the insurance company they also own...
This revolving circus has been going on for quite some time... but eventually there is no where else to get money from; all the companies have bled each other dry...
Oh wait - that's right! The government still has cash...
Ballmer is legally required to act in whatever way generates the most benefit for his shareholders - he doesn't actually have the option of acting "patriotically", unless it is pretty much cost neutral. If a major restructuring of the companies "resource allocation" can be shown to be significantly better for the bottom line, it's Ballmer's job to implement that change. CEOs make strategic mistakes all the time - predicting the future isn't an exact science, but when a bean-counter lays out in black and white a plan that will increase "shareholder value" by x% as a result of actions that comply with the current tax code, there's not much wiggle room for a CEO.
>If Citi reinvests its Asian profits in expanding to countries outside the US, say Eastern Europe >or Africa or South America, I don't quite see why they should pay a tax to the US.
It's when Citi (Bermuda) charges Citi (USA) a licence fee for every transaction, so that Citi (USA) makes a loss and the only profit is made in tax-free Bermuda that the government gets interested. This is what Dell,Google and MS did in Ireland to avoid paying tax in the UK and Germany.
If US companies didn't move offshore to take advantage of lower wages and taxes, new foreign companies would be set up. These companies would soon undercut the US companies and drive them out of business.
It's happened with steel, with cars, with consumer electronics, it will happen with software.
The US might try and revert to protectionist policies (lining the pockets of the corporate shareholders, at the expense of the consumer), but tarrifs haven't saved the industries above, and they wont save software.
I can't imagine why the US thinks they can pay higher wages and taxes simply because of their geographical coordinates.
Well, Microsoft (and others) have gamed the system so they really don't pay squat in tax, so governments squeeze the wage and salary earner which means the rich get richer, the poor poorer, and it all comes crashing down.
I'd rather everyone, with no exceptions paid taxes at the same rate. Anything else is going to be gamed and the world will be as broke as California.
As much as I hoped Obama would win the election (I am not a US citizen), and as much as I hate Microsoft, I have to agree with Ballmer: What happens outside of US jurisdiction is none of Obama's business (no puns intended). If the money cycle all happens overseas, then the US government has no claim on it. *However*, as soon as the product (or profit) hits US shores, that's another kettle of fish.
On the other hand, as a previous Poster noted, the whole "grey market is bad" line coming from companies busy offshoring to boost profit is something that should be rammed down their throat.
"If US companies didn't move offshore to take advantage of lower wages and taxes, new foreign companies would be set up."
On the face of it, that makes some sort of sense. In practice, what happens is this.
Western Company is a market leader in, say, the running shoe market. Lets call them ShoeCorp
ShoeCorp decides that they can further maximise profits by shifting their manufacturing offshore to a cheaper country who is offering tax incentives as an inducement. Lets say that this country is China.
ShoeCorp builds an impressive all bells and whistles manufacturing plant and employs the barefooted local villagers to operate it for cents per day.
A few years later, the local villagers are no longer barefooted and wages have been creeping up and the tax concession has disappeared. At the same time, another country, lets say India, has been making tax concession offers of its own, and pointing out that they still have ample supplies of barefooted villagers.
ShoeCorp considers this, and decides that all things being equal it would be more profitable to simply lock the doors to the old factory in China and build an even shinier one with even better bells and whistles in India so that is what they do.
Meanwhile, back in China there is now an empty shoe factory and a bunch of villagers who no longer have jobs. The Chinese Goverment considers this to be an unacceptable state of affairs and promptly reopens the shoe factory and re-employs the villagers who are already trained in it's operation.
Back over at ShoeCorp, their new Indian plant is churning out plenty of cheap shoes that they continue still selling at insane markup prices in order to provide the ShoeCorp executives with the level of salary plus bonus for which they have long been accustomed.
The old plant in China is also producing shoes that are virtually identical to those of ShoeCorp at a slightly higher marginal cost but the Chinese plant does not have the problem of needing to subsidise the flamboyant lifestyles of the ShoeCorp executive class or maintain their massive marketing budget, so they are able to undercut ShoeCorps products at point of retail by orders of magnitude.
ShoeCorp eventually realise that they have a problem, but what to do? Well, the obvious answer to these graduates of some blue ribbon ivy league business school is to cut costs in order to remain competitive. They then hear that the government of Vietnam is offering some pretty good tax incentives . . . .
"Hedge funds that are still alive are thinking of moving out of London fearing the EU regulations (currently in draft). I hear of new funds being set up in Geneva and Singapore, even Australia - but not London."
Geneva - check.
Singapore - maybe, but harsh punishments and less than tolerable regime compared to west may limit this. A regional play at best as cheaper than Hong Kong and Tokyo
Australia - let me pick myself up off of the floor. This is a country with punitive tax rates and socialist envy taxes such as the fantastic "luxury car tax" that cuts in at the equivalent of around GBP20-25k. I can really see uber-capitalists such as hedge funds going to a tax control freak economy with a socialist envy agenda. Why do you think Rupert Murdoch pissed off overseas.
Switzerland the only viable play here.
Gaming the tax system within bounds is fair play - we'd all like to reduce our tax if we could. It's when you get the piss taking cross border charge backs that someone ought to go in the clink as that's tantamount to evasion.
Nobody is going to borrow yet more money in order that Microsoft can pay less tax. When it comes to spending, Microsoft is first in line to get it's bridges built, when it comes to tax they are the last in line to pay a penny. Selfish and ultimately self defeating.
If they want to reflect on how the US got into this situation, they should look long and hard at their own selfish actions in 2000.
Ballmer should be ashamed.
Uk.gov should do the same... Any British company that has offshored jobs should pay some sort of Offshore Tax. Especially call centres. Hate ringing them up.
British workers were laid off because of greedy corporations offshoring jobs to increase their profit should be made to pay for the lost revenue in tax that UK.gov would have got from them if the jobs were still being done by British workers.
Nice! Very nice indeed. I happen to work for company who's in that business, only a menial little backroom IT staffer, in fact the IT and support staff out-number the slick suited, city lads 2-1 in my company. The company played by the rules, didn't take really stupid risks like some cretins, hence why I still have a job. If you had your way and the city boys leave and go elsewhere, taking their money, I and my fellow schmoes get tossed on the scrap heap for simply needing to earn a living in the only jobs available at the moment, bar wearing a badge with little gold stars and saying "Have a nice day!" to everyone I would have to serve!
Take the blinkers off and get back under the bridge!
Since Ballmer admits they are doing it to avoid taxes, the US Government should charge them with tax evasion and require them to pay all of their back taxes for the last 20 years.
Maybe putting Steve and Bill in a prison cell for a few years might adjust their attitudes.
Almost as if Microsoft won't offshore those jobs anyway.
It's easy for these companies. All they have to do is reregister in the country they prefer to do business in. Of course, that would make them vulnerable to the laws of that country, and the US wouldn't be obliged to put its still considerable weight behind these operations when things stop going according to their masters wishes.
If you are that unpatriotic Steve Balmer, get the eff out and stay out, you America-Hating Git. You'll *love* India. they get more rain than Seattle does, and more Sun in between than California. Best of both worlds really. Or there's China, where copies of your products have ten times the market penetration as the real thing. Your patents will be safe there for sure, and if they're not, well, at least you can take pride in that the copies are of Microsoft software and not the rubbishy Apple rubbish. Or there's Europe wher all things Microsoft are so very popular. Pity about the lawsuits, but you can't have everything. Perhaps Russia?
Yes, bugger off soonest and take sharepoint, passport and vista with you, gitface.
All American companies with any common sense would move
their operations offshore to escape the greedy islamic socialist
clutches of our White House Chimp and his supporting cast
of monkeys in Congress. Between this new "Sheriff of Nottingham",
Crooked Politicians, Supportive liberial Media, Labor Unions and
the Contingency Fee Tort system in the USA, America is finished
as a world economic power.
I'm continually amazed the way Amercians glibly say that Obama is a 'socialist'. As far as I can tell, this definition of socialist means nothing other than that he is using public money differently to his predecessor. As far as I can tell the Bush administration was very happy to use public money - mostly on the arms industry.
Oh yes, if Obama does anything at all the corporations (particularly News International) don't like, that's socialism too. War is Peace.
Outside the USA, socialism - as an ideological position - implies a belief in bottom-up organisation - even if the reality has been quite different in many cases. (The third "S" in USSR being the most notorious, just like the second 'D' in DDR might have undermined the word 'democracy' - ah but we in the enlightened free world want to use that D too, so it is 'untainted'. yeah right.). Having a few guys at the top making all the decisions is an anti-socialist and anti-democratic position. There is no real difference between Bush and Obama on that score.
BTW the comments here about grey markets were spot on. I think Ballmer is mostly just putting on the show for the shareholders. The simple fact is that tax havens compromise globalisation. You can't have your cake and eat it.
@David 23:26 GMT
What an excellent idea, but you are missing one important point, all these Johny foreigner companies created a better, cheaper product than the original 'merkin product, and probabally no secret backdoors for the NSA. So I for one would welcome such a situation.
The evil empire's Irish subsidiary, Microsoft Ireland Operations Ltd (MIOL), which is responsible for the software company’s distribution and logistics in Europe, the Middle East and Africa, had a turnover of €11.3 billion, paid corporation tax of €63.5 million and generated a pretax profit of €477 million in the 12 months to the end of June 2008.
This figure is down from the 2007 figures because MicroShit has reorganised (i.e. found a tax loophole) and has another company in Ireland, Microsoft Ireland Research (MIR), which allegedly employs only three or four microserfs, conveniently, MIR is an unlimited company which is not required to file accounts.
In 2008 MIOL’s expenses increased by almost €3 billion to €10 billion. A significant portion of this is accounted for by royalty payments to MIR associated with the products it shipped. MIR then pays a dividend to Micro$oft in 'merkin land.
So what happens is that MicroCrap sells sell a copy of Orifice in France, ships it from Germany, makes a profit in Ireland, and a tax loss in USA-land on the development cost, but a profit in dividends.
And so we continue to see the pigopolists view of the world, its only a global economy if they can get paid in the first world but pay taxes in the third world.
Way to go Obama, now, where's the evil ballmer icon
Wait... You mean Ballmer is upset because MS just might actually have to pay the taxes they owe--taxes that they, along with hundreds (thousands?) of businesses, have managed to ignore. Isn't the prospect of missed tax revenues a key foundation of the Business Software Alliance's (therefore, Microsoft's) big "Why we need to stop software piracy" initiative?
I'll save you the trouble--Yes it is--in every Global Piracy Study for the past five or six years, lost tax revenue is a key excuse for enacting more onerous legislation. Now, I realize we're discussing employment taxes, but isn't this the same basic problem? Um... Microsoft, the intent of that law was to enable you to move into the international marketplace and begin competing--not to avoid your responsibilities. Now that you are established, why not consider paying your debts to the societies that gave your company life?
What ever happened to the investigations into off-shoring intellectual property to Ireland to hide it from U.S. taxation? Ref, here is only one of the dozens of articles on side-stepping taxes that seem to have simply dried up: http://www.finfacts.ie/irelandbusinessnews/publish/article_10003995.shtml
Seems like there is a double standard going here... Surprised? Please accept my sincere apologies for speaking out. I realize it isn't "politically correct" to point out these types of scams.
Of course, when we get a world government, tax dodging and/or evasion of this kind will become impossible anyway.
I wish to be the first to welcome our new global tax-imposing overlords! Oh, and I could be available for that departmental software contract....
Paris, because she knows about doing it everywhere.
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