CEO Ballmer Says Tax Would Move Microsoft Jobs Offshore
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Ryan J. Donmoyer, Bloomberg
Steve Ballmer, chief executive of Microsoft Corp., speaks at a meeting of the Business Software Alliance in Washington, D.C. on Wednesda. Listening are Jeff Ray, CEO of Dassault Systemes Solidworks, far left, and John Thompson, chairman of Symantec Corp., to the right of Ballmer.Ken Cedeno/Bloomberg NewsSteve Ballmer, chief executive of Microsoft Corp., speaks at a meeting of the Business Software Alliance in Washington, D.C. on Wednesda. Listening are Jeff Ray, CEO of Dassault Systemes Solidworks, …
Microsoft Corp. chief executive Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.
“It makes U.S. jobs more expensive,” Mr. Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”
Mr. Obama on May 4 proposed outlawing or restricting about US$190-billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.
U.S. tax rules now let companies defer paying corporate rates as high as 35% on most types of foreign profits as long as that money remains invested overseas. Mr. Obama says he wants to end such incentives to keep foreign profits tax-deferred so they would invest them in the U.S.
Mr. Ballmer is one of 10 U.S. software company executives pushing back against the tax proposals in meetings Wednesday with White House officials including Jason Furman, deputy director of the National Economic Council, and the heads of congressional committees such as House Ways and Means Committee Chairman Charles Rangel, a New York Democrat.
Among other things, Mr. Obama proposed limiting expense deductions such as those for employee compensation when companies defer U.S. tax on foreign profits.
In a roundtable discussion Wednesday, Mr. Ballmer, Symantec Corp. Chairman John Thompson and the heads of smaller companies such as privately held Bentley Systems, an Exton, Penn.-based maker of engineering software, said such policies would hurt domestic investment, reduce shareholder value and increase the cost of employing U.S. workers.
Mr. Ballmer said that, while the Obama proposals would preserve expense deductions related to research and experimentation costs, the overall deduction limits for companies that defer tax on foreign profits would raise the cost of employing U.S. workers. Fiduciary responsibility to shareholders would require Microsoft to cut costs, he said, meaning many jobs would be moved out of the country.
Mr. Ballmer estimated that higher taxes under the proposal would reduce profits for companies that comprise the Dow Jones Industrial Average by between 10 and 15 percentage points.
“It’s just a question of how much will the Dow come down,” Mr. Ballmer said. “It’s not about companies anyway; we’re talking about shareholders.”
In addition to limiting current deductions for companies that defer U.S. tax on their foreign profits, Mr. Obama proposed altering a set of rules known as “check the box” that allow companies to shelter foreign profits in offshore subsidiaries that can be disregarded for U.S. tax purposes.
While the rules were designed in 1997 to protect U.S. companies from paying excessive tax to other governments, Obama administration officials say it has evolved into a way to duck U.S. liabilities. Altering the rule, which Mr. Obama dubbed a “loophole,” would generate US$86.5-billion in new revenue by 2019, the administration says.
The third international tax proposal would change rules governing how companies can claim tax credits for levies paid to foreign governments. Officials say some companies abuse the rule to accelerate tax credits before they could otherwise be claimed.
Mr. Thompson of Symantec, the Cupertino, Calif.-based maker of Norton anti-virus software and similar tools, said software companies are frustrated by being called tax cheats and compared with companies that moved their headquarters to low-tax countries such as Bermuda.
Mr. Thompson called the Obama proposals “counterintuitive” to the administration’s other stated goals of fostering an innovation-oriented economy.
“It is a little bit ironic that most of our most significant trading partners and partners globally have taken the tack that they’ll reduce corporate tax rates to stimulate economic growth and not raise corporate tax rates,” Mr. Thompson said.
The roundtable was organized for Bloomberg News by the Business Software Alliance, a Washington trade group coordinating the executives’ meetings with policymakers.
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