Microsoft owes $29bn in back taxes, says US tax body
What's the story
The Internal Revenue Service (IRS) in the US has revealed that Microsoft owes a whopping $28.9 billion in back taxes, penalties, and interest for the tax years between 2004 and 2013. This news has been disclosed in a Securities and Exchange Commission (SEC) filing. It has raised eyebrows as it underscores the complicated nature of international tax arrangements and sparks discussions about corporate tax practices.
Details
Microsoft responds to IRS audit
In a blog post, Microsoft's Corporate Vice President for Worldwide Tax and Customs, Daniel Goff, spoke about the IRS audit. He explained that Microsoft has revamped its corporate structure and practices since the years covered by the audit, making the IRS's concerns applicable only to past actions, not current ones. Goff also pointed out that the IRS's proposed adjustments don't consider the amounts Microsoft paid under the Tax Cuts and Jobs Act.
What Next?
Potential reduction in tax owed
Goff went on to say that the final tax bill for Microsoft could be reduced by up to $10 billion due to payments made under the Tax Cuts and Jobs Act. He also mentioned that Microsoft and the IRS disagree on how the company allocated profits internationally through a system of transfer prices known as cost-sharing. This disagreement could play a significant role in determining the final amount Microsoft owes the IRS.
Insights
Microsoft will contest the charges
Microsoft has announced that it disagrees with the IRS's "proposed adjustments" and will "vigorously contest" them. The tech giant also believes that the dispute is unlikely to be resolved in the next 12 months. To note, the firm recently emerged victorious against the FTC. The latter failed to secure an injunction against Microsoft's Activision Blizzard acquisition for $68.7 billion.