Microsoft has been asked by the US Internal Revenue Service (IRS) to pay $29 billion in unpaid taxes from 2004 to 2013, according to a filing by the company. This case draws attention to the tax practices of large multinational corporations that have been accused of shifting revenue to lower-tax jurisdictions in order to avoid higher taxes in their main markets. Microsoft plans to contest the demand through the IRS’s administrative appeals office and, if necessary, through judicial proceedings. The company stated that the disagreement with the IRS is related to its transfer of revenue across international jurisdictions during the mentioned period. Microsoft believes that it has followed IRS rules and regulations and is supported by case law. The appeal process with the IRS is expected to take years, and if unsuccessful, Microsoft will continue to fight the claim in court.
Microsoft explained that the issue emerged from a longstanding discussion with the IRS regarding the allocation of income and expenses for tax years starting from 2004. The company highlighted that it has since changed its corporate structure and practices, making the issues raised by the IRS relevant to the past but not to its current practices. Microsoft also emphasized that it has paid over $67 billion in taxes to the US since 2004.
Tax practices of major US tech companies have been a concern for authorities for a long time. Governments have accused companies like Apple, Amazon, and Microsoft of using low or zero-tax jurisdictions to shift revenue and avoid taxation in their primary markets, thus maximizing profits. In response to this issue, the Organization for Economic Cooperation and Development (OECD) brokered an international agreement among 140 countries, aiming to better share and regulate the tax revenue of these technology giants. The OECD recently published a draft agreement implementing a significant part of this deal, with hopes of ratification by the end of the year.
In 2016, the European Union ordered Apple to pay 13 billion euros ($14 billion) in back taxes over similar accounting practices. However, Brussels lost an appeal to Apple and is currently awaiting the outcome of a further appeal. It is important to note that the IRS cannot confirm or deny an ongoing tax case. This article was generated by a syndicated feed and has not been edited by NDTV staff.