How Microsoft keeps taxes down by using tax havens

With Congress focused on debt and debates about increasing tax revenues and closing tax loopholes for corporations, Microsoft's tax bill is in the news again.
By channeling its earnings from sales through low-tax havens of Ireland, Puerto Rico and Singapore, Microsoft is saving millions on its United States tax bill.
Microsoft is among a host of major U.S. corporations, including tech giants Apple and Google, that have huge stockpiles of cash offshore. The cash comes from overseas operations -- and in some cases accounting practices that shift domestic profits to countries with lower tax rates.
Microsoft recently reported a 30 percent increase in net income and 35 percent increase in earnings per share for the fourth quarter over the same quarter a year ago. But the Redmond software giant reported only $445 million in taxes in the U.S. and other foreign countries. That was just 7 percent of its $6.32 billion in pre-tax profit, according to Reuters.
Reuters reports that what Microsoft is doing isn't illegal and the moves benefit its shareholders, but U.S. regulators would like more detailed information on how much money big corporations are funneling through individual countries, which companies don't have to do right now.
Microsoft and other companies to get Congress to approve a so-called “tax holiday” to allow the companies to move the profits to the U.S. Without the tax holiday, the companies would have to pay a hefty tax to use the money in the U.S. to invest in hiring or to pay shareholder dividends and stock buybacks.
Microsoft is using its offshore cash to purchase Luxembourg-based Skype for $8.5 billion.