How MNCs minimise taxation

Ever wonder why a lot of large companies are incorporated in obscure countries like Canary Island, Bermudas, etc, when their main offices/markets/production sites are far away in every other corner of the world?

The answer lies in taxation....

Came across this interesting example of how Microsoft minimises their tax on profits, and in this case its Ireland.

"Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets. Virtually unknown in Ireland, on paper it has quickly become one of the country's biggest companies, with gross profits of nearly $9 billion in 2004.

Ireland's citizens may not have heard of Round Island One, but they benefit greatly from its presence. Last year the unit handed the government of this small country of four million citizens more than $300 million in taxes ... Microsoft routes the license sales through Ireland and Round Island pays a total of just under $17 million in taxes to about 20 other governments that represent more than 300 million people.

(This is not my comment, but the comment from the blog I am quoting from)But Microsoft does some real stuff in Ireland, so at least you can drive by one of their facilities and see the buzz of activity at Round Island? Errr.. No:

Round Island's legal address is in the headquarters of a Dublin law firm, Matheson Ormsby Prentice, that advertises its expertise in helping multinational companies use Ireland to shelter income from taxes. It represents other U.S. technology companies including Google Inc., which recently set up an Irish operations center that the firm credits in its SEC filings with reducing its tax rate. A Google spokesman said the company set up in Ireland to be close to its European customers. "Because that business is done outside of the U.S. it is taxed according to international law," he said. "