The US Internal Revenue Service (IRS) has sentenced Microsoft to £23.5 billion, the most recent development in one of the most significant corporate tax disputes in history.
The Microsoft Tax Dispute
It focuses on the distribution of Microsoft’s profits internationally from 2004 to 2013.
Critics assert that large U.S. corporations engage in transfer pricing to reduce their tax liabilities by relocating profits to low-tax jurisdictions, thereby avoiding payment of taxes in developed countries.
Other tech titans, such as Facebook and Amazon, have been urged to pay more tax.
Microsoft will appeal the results of the IRS audit, which could take years, claiming that it has paid more than £54.5 billion in US taxes since 2004.
“The principal point of contention is how Microsoft distributed profits among countries and jurisdictions during this period,” stated Daniel Goff, the company’s director of global tax and customs.
The Cost-Sharing Controversy:
“The Internal Revenue Service has also issued regulations permitting businesses to utilize a particular transfer pricing arrangement known as cost-sharing.” A significant number of large multinational corporations implement cost-sharing as a strategic approach to mirror the worldwide scope of their operations.
The exclusion of Trump-enacted legislation could decrease the price by £8 billion.
“We believe we have always complied with IRS regulations and paid taxes we owe in the United States and around the world,” the company stated.