How MS tax policy saves Gates millions – Nader

Manipulating the money pile


US consumer activist Ralph Nader has opened a new front in his war on Microsoft - tax fiddling. In a letter sent to Bill Gates on Friday, Nader and James Love, the director of Nader's Consumer Project on Technology, describe Microsoft's failure to pay shareholder dividends as "an inappropriate and we believe unlawful device."

They argue that by not paying dividends Microsoft is providing substantial tax advantages to its largest shareholders, the largest of these being His Billness himself. If Microsoft paid dividends, then shareholders would be taxed on the benefit at the top US rate of 39.6 per cent. But as Microsoft does not pay dividends, the only way shareholders can realise their assets is via stock sales, where the maximum tax rate is 20 per cent.

Ramming the point home, they note that SEC records show Gates himself sold $2.9 billion worth of Microsoft stock last year. He therefore saved himself a tax bill of something in the region of $580 million. According to Microsoft's 2001 proxy statement, 17.3 per cent of the company's stock is held by executive officers and directors. Gates holds around two thirds of that, and in addition co-founder Paul Allen still retains a significant stake.

This small group of amazingly rich people clearly do very nicely out of the company policy, but Nader and Love question whether this is in the interests of shareholders in general: "This also raises questions about whether or not these persons, including yourself, are accumulating these staggering sums of cash to advance other agendas, rather than to advance the interests of shareholders."

What these other agendas might be, they do not say. Becoming even more drippingly rich than would otherwise be the case seems a likely one, but apart from that...

They argue that Microsoft may be breaking the law by not paying dividends on the basis of US accumulated earnings legislation, which states that company cash piles "beyond the reasonable needs of the business" should be subject to the 39.6 per cent rate. Microsoft is currently sitting on something in the region of $36 billion, a sum analysts reckon far in excess of what it might 'reasonably need,' so they may have a point.

This is "twice the cash held by GM, a corporation that reported sales about seven times larger than Microsoft's. Moreover, the cash holdings by Microsoft are growing at an astonishing rate - about $1.5 billion per month over the last quarter. It is difficult to imagine how Microsoft, which has never paid a dividend, is not subject to the accumulated earnings tax." Whether the US will listen to Nader and impose the tax is of course another matter. ®

Related links:
Nader letter


Other stories you might like

  • Cuba ransomware gang scores almost $44m in ransom payments across 49 orgs, say Feds

    Hancitor is at play

    The US Federal Bureau of Investigation (FBI) says 49 organisations, including some in government, were hit by Cuba ransomware as of early November this year.

    The attacks were spread across five "critical infrastructure", which, besides government, included the financial, healthcare, manufacturing, and – as you'd expect – IT sectors. The Feds said late last week the threat actors are demanding $76m in ransoms and have already received at least $43.9m in payments.

    The ransomware gang's loader of choice, Hancitor, was the culprit, distributed via phishing emails, or via exploit of Microsoft Exchange vulnerabilities, compromised credentials, or Remote Desktop Protocol (RDP) tools. Hancitor – also known as Chanitor or Tordal –  enables a CobaltStrike beacon as a service on the victim's network using a legitimate Windows service like PowerShell.

    Continue reading
  • Graviton 3: AWS attempts to gain silicon advantage with latest custom hardware

    Key to faster, more predictable cloud

    RE:INVENT AWS had a conviction that "modern processors were not well optimized for modern workloads," the cloud corp's senior veep of Infrastructure, Peter DeSantis, claimed at its latest annual Re:invent gathering in Las Vegas.

    DeSantis was speaking last week about AWS's Graviton 3 Arm-based processor, providing a bit more meat around the bones, so to speak – and in his comment the word "modern" is doing a lot of work.

    The computing landscape looks different from the perspective of a hyperscale cloud provider; what counts is not flexibility but intensive optimization and predictable performance.

    Continue reading
  • The Omicron dilemma: Google goes first on delaying office work

    Hurrah, employees can continue to work from home and take calls in pyjamas

    Googlers can continue working from home and will no longer be required to return to campuses on 10 January 2022 as previously expected.

    The decision marks another delay in getting more employees back to their desks. For Big Tech companies, setting a firm return date during the COVID-19 pandemic has been a nightmare. All attempts were pushed back so far due to rising numbers of cases or new variants of the respiratory disease spreading around the world, such as the new Omicron strain.

    Google's VP of global security, Chris Rackow, broke the news to staff in a company-wide email, first reported by CNBC. He said Google would wait until the New Year to figure out when campuses in the US can safely reopen for a mandatory return.

    Continue reading

Biting the hand that feeds IT © 1998–2021