Tech giant Microsoft has avoided billions in taxes in Britain, Australia and New Zealand, all countries where it has lucrative public sector contracts, due to its complex corporate structure, says a study released Thursday.
The company, which insists it follows local laws and regulations everywhere it operates, was depriving the public purse of much-needed revenue while taking cash from taxpayers, the Center for Corporate Tax Responsibility and Research said. Citar).
“In many cases, Microsoft has paid zero tax in recent years by shifting profits to companies domiciled in Bermuda and other known tax havens,” Cictar said in a statement.
According to the study, 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 taxes in 2020.
In another example, Microsoft Singapore Holdings posted dividend earnings of $22.4 billion in 2020, but announced a tax liability of just $15.
“Microsoft boasts of profit margins of more than 30 percent for its shareholders. However, in the UK, Australia and New Zealand, filings show returns of three to four percent,” said Jason Ward, an analyst with the organization.
“It doesn’t seem credible that these rich markets are underperforming so much,” he said, calling “this kind of discrepancy…a big red flag for tax evasion.”
“Microsoft deprives the public sector of much-needed revenue” while “earning 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 $3.3 billion in Britain, the United States, Australia and Canada, according to the study.
Microsoft is under investigation by tax authorities in the United States and other countries, including Australia, and “more than 80 percent of its total foreign revenue is channeled through Puerto Rico and Ireland,” according to the report.
“In fiscal 2021 and 2020, our foreign regional operating centers in Ireland and Puerto Rico,” Microsoft said in its 2021 annual report.
“Taxed at rates lower than the US rate, (they) generated 82 percent and 86 percent of our foreign income before taxes.”
Contacted by the report’s authors, Microsoft said it respected “all local laws and regulations” in the countries where it operates.
“We serve clients in countries around the world and our tax structure reflects that global footprint,” the company said in a statement.