The American tax authorities (IRS) want to reclaim the equivalent of 27.21 billion euros from Microsoft, and that is excluding any fines and interest. Microsoft reports this Thursday. The IRS did not want to comment on the case to the Reuters news agency. Microsoft does not intend to pay the entire levy, and says that the equivalent of almost 10 billion euros must be deducted from the tax. The tech company wants to challenge the tax first through the bureaucracy of the IRS and otherwise through the American legal system. The company assumes it will take years to resolve the case. Investors are not impressed, Microsoft shares fell by 1.34 euros to 311.72 euros.
According to Microsoft, the IRS looked at so-called ‘transfer pricing’ in the period 2004-2013, a tax construction in which a multinational conveniently distributes its profits among countries where it is located. According to the British business newspaper Financial Times Microsoft moved parts of its intellectual property to Singapore, Ireland and Puerto Rico, where taxes for large companies are incredibly low.
2014-2017 also under scrutiny
The tax authorities’ conclusion that Microsoft should pay a billion-dollar tax is incorrect, according to the tech giant, because “the problems raised by the IRS are relevant to the past, but not to our current corporate structure.”
The company writes: “Microsoft has historically been one of the top taxpayers in corporate America.” Since 2004, the company says it has paid more than 63 billion euros in taxes in the United States. In addition to the billion-dollar levy that Microsoft announced on Thursday, this could become even more. The IRS is also investigating whether Microsoft paid enough taxes between 2014 and 2017.
It’s not just the IRS that is at odds with Microsoft. This summer, the market watchdog Federal Trade Commission (FTC) demanded almost 19 million euros from the tech company because the Microsoft game console Xbox registered and stored children’s data without parental consent. The chair of the FTC, Lina Khan, has been specifically appointed by President Joe Biden to take on ‘Big Tech’.