BIG INK FOR MR. LOOPHOLE
After years of hounding journalists and regulators around the country with
outraged pleas for attention to a strange paradox--that the most profitable
companies in the world pay almost no taxes--local tax master Bill Parish is
finally getting some ink.
In June, The New York Times ran a front-page article built on Parish's
criticism of Microsoft's accounting practices. This month, the San
Francisco Chronicle and the San Jose Mercury News devoted major
space to Parish's analysis of Cisco, the Internet monolith that he says paid
no federal income taxes last fiscal year despite posting more than $4 billion
in pre-tax profits. (All articles are archived at www.billparish.com.)
And last month, after what Parish says was a half-hour conversation
between the two men, Ralph Nader joined the fray, standing on the steps of
Cisco's San Jose headquarters and lambasting the high-tech company's tax
holiday.
Parish, an accountant turned financial advisor, first happened onto a huge
loophole when he began studying Microsoft's financial statements two years
ago ("Window Dressing," WW, March 10, 1999). In a nutshell, tax law
allows companies to deduct the value of options that its employees
exercise, even though the options don't actually cost the company anything.
In last year's fourth quarter, for instance, Microsoft reported pre-tax
income of $3.320 billion; employees exercised options worth $3.471
billion, thus wiping out the company's federal tax obligation.
High-tech companies such as Microsoft and Cisco depend heavily on
options to compensate their employees, and with the phenomenal
performance those two companies have posted until recently, their options
have generated enormous tax deductions--on the order of $22 billion
combined for the two companies last year.
Parish feels vindicated by the recent coverage--with one exception. Even
though wire services have picked up the recent California stories, nary a
word has appeared in Portland's daily paper. "Who's publishing The
Oregonian, [Fred] Stickel or Pam Edstrom [Microsoft's publicist]?" Parish
asks. "To this day, they've never printed a word about the fact that
Microsoft pays no taxes." |
