Technology giant Microsoft Corp has avoided billions in taxes in the UK, Australia and New Zealand, all places where it has lucrative public-sector contracts, because of its complex corporate structure, a study published yesterday claimed.
The company, which insists it respects local laws and regulations everywhere it operates, was starving the public purse of much-needed revenue while receiving taxpayer cash, the Center for International Corporate Tax Accountability and Research (CICTAR) said.
“In many cases, Microsoft has paid zero tax in recent years by moving profits to companies tax-domiciled in Bermuda and other well-known tax havens,” CICTAR said in a statement.
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According to the study, Microsoft Global Finance ULC — an Irish subsidiary that has tax resident status in Bermuda — consolidated more than US$100 billion in investments and, despite an operating profit of US$2.4 billion, paid no tax in 2020.
In another example, Microsoft Singapore Holdings Pte posted profits from dividends of US$22.4 billion in 2020, but announced a tax liability of just US$15.
“Microsoft boasts of profit margins of over 30 percent to its shareholders. Yet, in the UK, Australia and New Zealand, filings show returns of 3 to 4 percent,” said Jason Ward, a CICTAR analyst.
“It does not seem credible that these wealthy markets are underperforming so dramatically,” he said, calling “this type of discrepancy ... a huge red flag for tax avoidance.”
“Microsoft starves the public sector of much needed revenues” while it “makes billions as a government contractor, with contracts at all levels of government and in virtually every country,” CICTAR said.
In the past five years, Microsoft has signed public contracts worth at least US$3.3 billion in the UK, the US, Australia and Canada, the study said.
Microsoft is under investigation by tax authorities in the US and other nations, including Australia, and “more than 80 percent of its total foreign income is channeled through Puerto Rico and Ireland,” the report said.
“In fiscal year 2021 and 2020, our foreign regional operating centers in Ireland and Puerto Rico, taxed at rates lower than the US rate, generated 82 percent and 86 percent of our foreign income before tax,” Microsoft said in last year’s annual report.
Contacted by the report’s authors, Microsoft said it respected “all local laws and regulations” in the nations where it operates.
“We serve customers in countries all over the world and our tax structure reflects that global footprint,” the company said in a statement.
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