Microsoft Admits Keeping $92 Billion Overseas to Avoid Paying $29 Billion in US Taxes
In a recent development, the US Internal Revenue Service (IRS) has demanded that Microsoft pay a substantial $29 billion in unpaid taxes covering the period from 2004 to 2013. This demand highlights ongoing concerns about the international tax practices of major multinationals. These companies have been accused of shifting their revenue to lower-tax jurisdictions to minimize their tax liabilities in their primary markets.
Microsoft has strongly contested this demand, stating that they disagree with the proposed adjustments. They plan to vigorously challenge the IRS’s demand through the administrative appeals office and, if necessary, in judicial proceedings. The issue with the IRS centers on Microsoft’s practice of transferring revenue across international jurisdictions, referred to as cost-sharing, a common practice among large multinationals due to the global nature of their operations.
Microsoft firmly asserts that they have adhered to IRS rules and regulations and cite case law in support of their position. They anticipate a lengthy appeals process, which could take years. The demand arises from a decade-long discussion with the IRS concerning the allocation of income and expenses for tax years dating back to 2004. Microsoft also emphasized that their corporate structure and practices have evolved since then and that the issues raised by the IRS pertain to the past and not their current practices.
This case is part of a broader international concern regarding the tax practices of major tech companies, including Apple, Amazon, and Microsoft. Governments are increasingly scrutinizing their accounting practices, accusing them of shifting revenue through low-tax jurisdictions to minimize taxation in their primary markets and maximize profits. In response, there have been international efforts, such as an OECD-brokered agreement among 140 countries, aimed at better sharing and regulating the tax revenue of these tech giants.
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