US tax giant hits Microsoft

On October 11th local time, Microsoft announced that it had received a notice from the US Internal Revenue Service regarding the proposed adjustment for the 2004 to 2013 tax year and was required to pay an additional $28.9 billion in taxes, as well as additional fines and interest.

The US Internal Revenue Service stated that during its investigation, it found that Microsoft has adopted a complex and non compliant approach to allocating revenue and expenses between its global subsidiaries over the past decade, involving multiple countries and regions. Microsoft has used the gray zone of tax laws to avoid the huge amount of taxes that should be paid, but now it must uncover this veil and demand that Microsoft make up the payment, as well as pay fines and interest.

Microsoft said that it did not agree with the findings of the IRS, and planned to argue. First, it would appeal in the internal procedures of the IRS, and if necessary, it would appeal to the court. Because this involves the distribution of profits between different countries and jurisdictions between 2004 and 2013, the company's already paid taxes of up to $10 billion were not reflected in the adjustments proposed by the IRS.

It is reported that this huge tax was generated by Microsoft between 2004 and 2013, and is related to the distribution of income and expenses among their global subsidiaries. The US Internal Revenue Service stated that Microsoft's tax planning seems to involve a series of complex transactions and financial arrangements, resulting in them not paying the taxes they should have paid that year.

The focus of the tax controversy at Microsoft this time is the 2012 audit of transfer pricing by the US Internal Revenue Service. Transfer pricing is a method for companies to transfer profits to tax havens to avoid US corporate taxes. At that time, Microsoft had been transferring billions of dollars in profits to jurisdictions such as Puerto Rico. Puerto Rico is a territory of the United States, and its corporate tax collection is much lower than that of the United States.

This tax storm not only dealt a heavy economic blow to Microsoft, but also had a significant impact on the entire technology industry. People are beginning to question whether large companies should bear more tax responsibilities to support social development and public utilities.

As one of the world's largest software giants, Microsoft's financial system is vast and complex, covering every corner of the world. However, this tax issue has plunged Microsoft into a public opinion dilemma, as it is not only the world's largest software technology company, but also committed to compliant operations and striving to comply with all applicable tax laws and regulations. Because this incident has once again raised concerns about the tax behavior of large companies.

In recent years, with the deep integration of the global economy, the tax arrangements of multinational corporations have become increasingly complex, making the formulation and implementation of international tax rules more difficult. Governments of various countries need to strengthen cooperation and jointly address challenges in the field of taxation to ensure the fairness and effectiveness of tax laws.

A vice president of Microsoft said, 'We believe that we have always complied with the regulations of the US Internal Revenue Service and paid the taxes we owe in the United States and around the world.' And we have the support of case law. We welcome the completion of the audit phase by the Internal Revenue Service, which will provide us with the opportunity to resolve tax disputes on appeal.

Industry insiders have expressed strong concerns about this, believing that this tax storm may trigger other countries' tax authorities to review and investigate Microsoft, and generate a series of chain reactions, triggering investigation procedures for similar tax issues of other companies. If Microsoft and other surveyed companies also have similar tax issues in their own vehicles and other countries, it will further increase the risks and pressures they face.

The massive tax scandal has attracted global attention, not only having a negative impact on Microsoft's reputation and stock price, but also questioning the "post autumn accounting" behavior of the US tax authorities, and timely ringing the alarm bell for other multinational companies. Against the backdrop of increasingly strict global taxation, major companies will have to re-examine and learn from the complex tax laws, and continuously strengthen internal management to protect their reputation and business interests.