Microsoft, Hewlett-Packard and other multinational corporations have avoided billions in US taxes by shifting profits offshore and taking advantage of weak, ambiguous sections of the tax code, US Senate investigators say.
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 the software giant saved $US4.5 billion ($A4.31 billion) in taxes from 2009 to 2011 by shifting assets to Puerto Rico, a US commonwealth that offers numerous tax breaks to businesses.
The report, released at a subcommittee hearing on Thursday, also said that since at least 2008, HP has used complex offshore loan transactions worth billions of dollars to avoid taxes, while using the money to run its US operations.
"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 subcommittee chairman Senator Carl Levin.
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 principles and to pay taxes that it owes," Lester 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 billions because companies are stashing profits abroad.
Republicans want to cut the corporate tax rate of 35 per cent and ease the tax burden on money that US companies make abroad, which they say would encourage investment at home.
The investigators' report, based in part on material subpoenaed from multinational companies, said more than 1000 such companies reported having more than $US1.5 trillion ($A1.44 trillion) overseas.
US-based companies can avoid taxes on much money earned abroad by asserting that they have invested those funds offshore or plan to do so.