WASHINGTON – Microsoft Corp., the Hewlett-Packard Co. and other multinational corporations have avoided billions in U.S. taxes by shifting profits offshore and taking advantage of weak, ambiguous sections of the tax code, Senate investigators said Thursday.

Microsoft used “aggressive” transactions to shift assets to subsidiaries in Puerto Rico, Ireland and Singapore, in part to avoid taxes, said the report by the Senate Permanent Subcommittee on Investigations.

In one example, the report said that the Washington state-based software giant saved $4.5 billion in taxes from 2009 to 2011 by shifting assets to Puerto Rico, a U.S. commonwealth that offers numerous tax breaks to businesses.

The report, released at a subcommittee hearing, also said that since at least 2008, HP has used complex offshore loan transactions worth billions of dollars to avoid paying taxes while using the money to run its U.S. operations. The high-tech company has its headquarters in Palo Alto, Calif.

“The bottom line of our investigation is that some multinationals use our current tax system to engage in shams and gimmicks to avoid paying the taxes they owe,” said Sen. Carl Levin, D-Mich., chairman of the subcommittee.

Executives of both companies said they have complied with American tax laws.

“I can assure the committee that HP takes seriously its obligations to accurately follow accounting principle and to pay taxes that it owes,” Lester D. Ezrati, HP’s senior vice president for taxes, told the panel.

The report was released weeks before elections in which one of the noisiest partisan clashes is over whether — and how — to raise revenues to help reduce federal deficits.

Many Democrats have complained that the government is missing out on collecting billions of dollars because companies are stashing profits abroad, thus avoiding taxes. Republicans want to cut the corporate tax rate of 35 percent and ease the tax burden on money that U.S. companies make abroad, which they say would encourage them to invest at home.

Many in both parties say they want to overhaul the entire tax code, but there are vast differences regarding how they would do so.

 

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