U.S. multinationals exploit tax code around the world - by Jia Lynn Yang

 Many U.S. multinational corporations, including Microsoft and Hewlett-Packard, have exploited weaknesses in the tax code to avoid paying billions of dollars in taxes on overseas profits, said a Senate subcommittee report released Thursday.

The Committee on Homeland Security and Governmental Affairs’ permanent subcommittee on investigations found that from 2009 to 2011, Microsoft was able to save up to $4.5 billion in taxes by transferring some of its intellectual property rights to a Puerto Rican subsidiary.

A memo by the subcommittee also described how ­Hewlett-Packard used billions of dollars of internal loans to duck taxes on foreign profits it was using to fund U.S. operations.

The actions of these companies aren’t illegal, said Sen. Carl Levin (D-Mich.), subcommittee chairman. But he said the strategies qualify as “gimmicks” that should not be allowed in the tax code.

At the subcommittee’s hearing Thursday, executives from Microsoft and Hewlett-Packard defended their firms as acting well within U.S. and foreign tax laws. Officials added that the U.S. code needed to be simplified in order for companies to compete abroad.

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