14 DAY TRIAL // Microsoft's business in China goes from bad to worse, as the company has recently received a $137 million (109 million euro) fine in the country for tax evasion.
Neither Microsoft nor the Chinese authorities have commented on this case, but a report published by Reuters and citing local media claims that the Redmond-based software giant has already admitted to tax evasion and agreed to pay the fine without filing for an appeal.
The report first published by China's Xhinhua news agency is a little bogus though, as Micorsoft's name is not specifically mentioned, but a company whose name starts with the letter “M” and which opened the first subsidiary in Beijing in 1995.
While Microsoft perfectly fits this description, official details are still unavailable, which makes everyone wonder if this report is indeed true or not. We've obviously contacted the company for a word on this and will update the article when we have more information.
Channeling sales to foreign subsidiaries
The term tax evasion is a little bit too vague, so in case you're wondering what exactly Microsoft did to get such a fine, the answer is as simple as it could be: it turned to the same tax avoidance schemes that it's accused of in other countries, including its home market United States.
The report indicates that Chinese authorities found that Microsoft was channeling local sales through foreign subsidiaries based in Ireland, Singapore, and Puerto Rico, and what's more, reported a loss in the last six years in the country to avoid paying a tax on its profit.
Microsoft losses accounted for 2 billion yuan ($325 million / 261 million euros) for the past six years in China, while the aforementioned foreign centers posted huge profits thanks to these tax dodging.
Also involved in legal dispute in the US
The company has recently moved a dispute with the United States IRS to the court, asking the judge to force the agency to provide more information on a recent investigation that involves Microsoft.
Redmond says that it has already submitted an FOIA request to the IRS, but the agency has refused to answer until now, remaining completely tight-lipped on the subject to avoid sharing any details on what could be a new possible tax evasion investigation.
“Government agencies, funded by citizens, have an obligation of transparency under the Freedom of Information Act. The IRS has failed to meet the deadline to respond to a valid FOIA request, and we’re simply asking a Court to ensure that the IRS meets its obligations,” a Microsoft spokesperson told us in a statement.
The firm is still waiting for an answer on this, so we'll update this article when more details are available.
