Microsoft dodges tax despite making money from public sector contracts
By Jeph Ajobaju, Chief Copy Editor
A complex corporate structure has for years enabled Microsoft to avoid billions of dollar taxes in major countries where it has lucrative public sector contracts, including Britain, Australia, and New Zealand, a study has found.
Microsoft says it respects laws in countries where it operates, but a study by Center for Corporate Tax Accountability and Research (Cictar) finds the tech giant receives taxpayer cash, makes billion dollar profits, yet deprives public treasury of revenue.
“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.
The study found Microsoft Global Finance – an Irish subsidiary that has tax resident status in Bermuda – consolidated more than $100 billion in investments and, despite an operating profit of $2.4 billion, paid no tax in 2020.
Microsoft Singapore Holdings posted profits from dividends of $22.4 billion in 2020 but announced a tax liability of just $15.
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Red flag for tax avoidance
“Microsoft boasts of profit margins of over 30 percent to its shareholders. Yet, in the UK, Australia and New Zealand, filings show returns of three to four percent,” said Cictar analyst Jason Ward, per AFP reporting, published by The Guardian.
“It does not seem credible that these wealthy markets are underperforming so dramatically …. This type of discrepancy … [is] a huge red flag for tax avoidance.”
The report said “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.”
In the past five years, the study found, Microsoft has signed public contracts worth at least $3.3 billion in Britain, the US, Australia, and Canada.
Microsoft is under investigation by tax authorities in the US and other countries, including Australia, and “more than 80 percent of its total foreign income is channelled through Puerto Rico and Ireland.”
Microsoft disclosed in its 2021 annual report that “In fiscal year 2021 and 2020, our foreign regional operating centres in Ireland and Puerto Rico … taxed at rates lower than the US rate, (they) generated 82 percent and 86 percent of our foreign income before tax.”
In reaction to the report, Microsoft said it respects “all local laws and regulations” in the countries where it operates.
“We serve customers in countries all over the world and our tax structure reflects that global footprint.”