Microsoft is set to challenge a demand by the US Internal Revenue Service (IRS) for an additional $28.9 billion (£23.5 billion) in back taxes related to the years 2004 to 2013. The IRS has been investigating how the tech giant allocated its profits across different countries and jurisdictions during this period.
In response, Microsoft stated that “the issues raised by the IRS are relevant to the past but not to our current practices.” The company maintains that it has consistently followed IRS rules and paid the taxes it owed both in the United States and internationally.
There has been ongoing concern regarding the tax practices of major corporations, particularly in developed nations. Tech giants, including Microsoft, have faced criticism for minimizing their tax burden by reporting lower profits in high-tax countries and higher profits in lower-tax jurisdictions.
Microsoft revealed in a securities filing that the IRS’s request for additional taxes amounted to $28.9 billion, plus associated penalties and interest. The company also expressed the belief that any taxes owed following the audit would be significantly reduced, potentially by up to $10 billion, based on tax laws passed during the administration of former President Donald Trump.
This tax dispute is not unique to Microsoft, as other American tech firms, such as Amazon and Facebook, have encountered similar calls to increase their tax contributions in recent years.
In addition to the back taxes issue, Microsoft has also faced scrutiny from other US regulatory authorities this year. In June, the company agreed to pay $20 million to the Federal Trade Commission (FTC) for the illegal collection of data from children who had created Xbox accounts.
However, Microsoft may soon secure a significant victory in its ongoing bid to acquire Activision Blizzard, the maker of popular games like “Call of Duty.” The $68.7 billion deal is expected to be finalized in the near future.
