Microsoft tax practics under scrutiny after $25 million tax settlement
Technology companies are coming under increasing scrutiny for complex tax avoidance practices, and Microsoft has not innocent of the practice, having in the past been accused of funnelling £8 billion of revenue to Ireland since 2011 and thereby avoiding £100 million in UK corporation tax.
Now the company has had to pay $24,748,658 to the New Zealand Inland Revenue as part of a settlement for business it conducted before June last year.
Microsoft has bee under audit over its transfer pricing practices, which relate to the fees it pays to other Microsoft companies for services they supply to the subsidiary. Like many countries, the New Zealand Inland Revenue has been tightening its review of the tax practices of multinationals.
The exact details of irregularities have not been revealed. Multinationals can potentially under-report profits and underpay taxes in countries such as New Zealand by charging too high a price for such internal transactions.
In 2014 Microsoft transferred the ownership of its New Zealand subsidiary from the United States to Luxembourg and in 2017 it re-homed its business to Bermuda.
Microsoft NZ only said in its annual accounts that it had faced a “tax adjustment” of $24.7m and confirmed that its dispute with Inland Revenue had now been resolved.