HP and Microsoft will undergo an investigation spearheaded by the US Senate Permanent Subcommittee on Investigations for claims that they practice tax evasion.

Senator Carl Levin, chair of the US Senate Permanent Subcommittee on Investigations, has contended that both HP and Microsoft evaded billions in taxes by stashing away profits abroad.

The tech giants used “loopholes and gimmicks” to circumvent paying large amounts of US corporate income taxes, stated the US legislator.

“Major U.S. corporations are increasingly earning their profits here but shipping them overseas to avoid paying the taxes they owe,” said Levin, a Senator from the state of Michigan.

“At a time when we face such difficult budget choices, and when American families are facing a tax increase and cuts in critical programs from education to health care to food inspections to national defense, these offshore schemes are unacceptable.”

His recent senatorial report revealed that US$1.5 trillion of corporate taxes are unpaid because companies transfer their profits to other countries.

Levin says the tech industry loses from widespread tax evasion; tech firms exploit tax-free patent licensing fees by manipulating licenses to overseas tax havens.

“The high-tech industry is probably the [number one] user of these offshore entities to transfer intellectual property,” Levin added.

According to the report, Microsoft saved up US$4.5 billion in taxes by shifting its intellectual property (IP) rights fees to the US Commonwealth of Puerto Rico, which offers companies solid tax bonuses.

The report alleged that HP is avoiding taxes by shuffling profits to overseas companies and is loaning that money back to itself to stay clear from paying taxes on profits.

Senator Levin clarified that the corporations’ anomalies were within lawful activities, but is hoping the Subcommittee’s investigation will straighten out both firms’ actions and eventually close loopholes of the tax code used for tax evasion.

“For more than a century, American markets have been the envy of investors across the world,” Levine said.

“We must continue to examine the regulations and structure that has been put in place to ensure that today’s equity market is fair for all and has the right protections in place to prevent technical glitches from causing a collapse.”

Various US tech firms have been named for facing tax payment issues, which include US telecoms carrier Sprint Nextel for charges on seven years of tax evasion by state of New York in April of this year.

Source: US Senator Levin

Image: Dominic Alves, via Flickr (CC)

About Francis Rey Balolong

A coffee junkie who spends most of his time writing about the latest news on social media and mobile technology. I would definitely consider myself a nerd (in the coolest most hipster way possible). That being said, I love technology, music, writing, and all things mobile. Follow me: Google+ Twitter

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