Microsoft finds itself in hot water with the IRS, owing a staggering $28.9 billion in back taxes, exclusive of any penalties and interest. But this isn’t your usual tax evasion story; it’s a saga that stretches almost a decade. The IRS has been scrutinizing Microsoft’s use of “transfer pricing,” a common but controversial tactic among multinational corporations to allocate profits and expenses between different regional branches.
Microsoft plans to contest the huge amount of money it has to pay
Transfer pricing isn’t inherently dodgy. Microsoft claims it simply reflects “the global nature of their business,” allowing subsidiaries to share the costs of developing intellectual property and, hence, the profits. But critics argue that the method is often misused to game the system. Companies can report lower profits in countries with high taxes, thereby cutting their tax bill. In Microsoft’s case, the IRS’s decade-long investigation concluded that the tech giant owes a significant amount in back taxes, specifically from 2004 to 2013.
Microsoft, however, isn’t taking this lying down. First off, it contests the $28.9 billion figure and believes that recent changes in tax laws could shave off a hefty $10 billion from that amount. The company also highlighted that its corporate practices have evolved since the years under scrutiny, implying that the issue is almost historical at this point.
But it’s not over till it’s over. Microsoft has made it clear that it will use all available avenues, including legal ones, to challenge the IRS decision. The company’s appeal within the IRS could take years, and if that doesn’t resolve the issues, the courts will be the next battleground.
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(Via)
