Carl Levin

We do need some kind of broader reform of the system, which at the same time as enabling us maybe to cut the corporate tax rate will also prevent particularly further profit shifting.

Is it not then in Microsoft's tax interest in terms of reducing its taxes to enter into an agreement which has little coming back to the United States?

And you agreed, I believe, that this was located where it is for tax purposes.

All right. So Microsoft Puerto Rico got $1.6 billion from Microsoft's Irish subsidiary called Round Island One. Is that correct?

Every time, though, a Microsoft product is sold, 47 percent of the sales price is sent to Puerto Rico where Microsoft pays no tax.

We are very much open about our appreciation to you.

And the justification for that under current law should be required, should it not?

Should they be reformed in the meantime, closed?

Any way they want, they can shift all that income overseas?

Even though there are two technically separate corporations, they are under common control.

Shouldn't the IRS then aggressively require a justification for that kind of a gap?

Is that something which we ought to address and end?

Are they rules of the IRS or is it our rules that need to be changed?

Does that not create a presumption that this is obviously not a fair price that is being paid?

I think it is highly dubious, frankly, that the loan program complies with our current tax law.

America stands on the edge of a fiscal cliff, and this challenge lends new urgency to a topic that this Subcommittee has long investigated.

We need aggressive enforcement.

I think everybody would love to reform the Tax Code and reduce tax rates if we can in the process.

Would that address this gap, this discrepancy?

There is nothing heinous in that. There is nothing illegal in that.

The resulting loss of revenue is one significant cause of the budget deficit and adds to the tax burden that ordinary Americans bear.

The record will show you did not say yes. But that is OK.

You do not have any people in Bermuda, do you?

Is it then clearly in Microsoft's interest in terms of reducing U.S. taxes to have its offshore subsidiaries pay as little as possible to the United States and then sub-license the intellectual property to others for as much as possible?

So Microsoft takes some of the money that it has and sends it over to Puerto Rico.