Tax row turns to Microsoft over £1.7bn of online revenues … let's stick-it to the upper 2% rather than addressing the real issue.
The US technology group is understood to be channelling online payments for its Windows 8 operating system and other downloads of software through Luxembourg and Ireland, where corporation tax is lower than the UK.
This means that Microsoft’s Irish registered company, Microsoft Ireland Operations Ltd, has reported £1.7bn of revenues from the UK on which the company has paid no UK corporation tax.
Microsoft said on Sunday night: “Microsoft pays all due taxes, as required by law, worldwide. Microsoft subsidiaries are fully subject to tax in the jurisdictions in which we operate.
“We are regularly audited by major tax jurisdictions, which ensure the company is complying with all rules and regulations.”
Microsoft pays corporation tax in the UK on other parts of its business, including marketing.
However, the scrutiny on the company follows criticism of other internet giants such as Amazon and Google.
Last week, coffee chain Starbucks said it would overpay its tax bill in the UK by £20m over the next two years after coming under pressure over its tax arrangements.
The US company has been lambasted by politicians for paying just £8.5m in corporation tax in the UK over the last 14 years.
The small amount of tax paid was despite Starbucks UK recording sales of £3bn during the same period.
Kris Engskov, managing director of Starbucks UK, said that the company had been shocked by the “emotional” reaction of its customers to the tax row. Mr Engskov said that Starbucks will no longer claim tax deductions for royalties to its Amsterdam office, inter-company loans, capital allowances and coffee purchases.
However, despite the unprecedented payment, Starbucks was targeted by protesters over the weekend who called for the company to overhaul its accounting measures and tax arrangements.
UK Uncut targeted more than 40 Starbucks sites in the UK and is thought to have attracted up to 1,000 campaigners.
The head of the organisation reviewing global tax rules, the OECD, said on Sunday that the behaviour of multinational companies regarding tax is getting worse.
Pascal Saint-Amans, the director of the OECD’s centre for tax policy and administration, said there is a “large and growing gap” between where companies conduct their business and record their profits.
“Guess what? The location of the economic activities is in higher tax jurisdictions, but the location of the profits is in lower tax jurisdictions,” he told The Observer.
However, Mr Saint-Amans, who is drawing up a set of tax proposals for G20 countries to consider next year, said that the issue has now been recognised as a “political concern”.
Microsoft has already been criticised for the amount of tax it pays in the US.
A Congressional investigation earlier this year designed to highlight the loopholes in America’s tax code claimed that Microsoft, the world’s largest software company, shielded its profits from at least $6.5bn (£4.1bn) of taxes through a series of transactions with foreign subsidiaries in countries with low tax rates, such as Ireland, Singapore and Puerto Rico.
Carl Levin, the senator who chairs the committee, said: “These loopholes and abuses exact a tremendous cost. What these gimmicks do is shift the burden of taxes on to citizens and businesses who don’t use armies of lawyers and accountants.”
Microsoft has denied any wrongdoing in the US and said that it complies with tax laws. OF COURSE THERE NO WRONG DOING … THIS HAS BEEN GOING ON FOR DECADES!!! IF YOU DON'T LIKE THE TAX LAWS, THEN CHANGE THE TAX CODE … DON'T CARP ABOUT IT ENDLESSLY IN THE MEDIA!!! IF YOU LOOK IN THE MIRROR YOU WILL SEE WHO CREATED THIS MESS!
Apple reported its fourth quarter results today, announcing revenue of $36 billion and a quarterly net profit of $8.2 billion, beating its own estimates by $2 billion and the analysts’ consensus number by a very narrow $200 million.
One of the big stories in Apple’s results is slowing growth in international sales.
Forty percent of Apple sales are consummated in the United States. That may sound bad, but it’s actually good, and it’s up from the second quarter of this year, in which 36 percent of sales were home on the range, and the just-previous third quarter, in which 38 percent of Apple sales were consummated locally.
But all of the money may not be available for immediate use, as Fortune reports that Apple is one of a number of U.S. companies with significant profits generated in international markets that continue to sit abroad as the companies prefer to not pay the 35% federal tax charged on such foreign earnings.Google Revenues Sheltered in No-Tax Bermuda Soar to $10 Billion and less we forget G.E. to name another corporation also takes advantage of our tax code. So what!!! The whining & snievling voters of the Entitlement Culture need a wake up call!
Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into aBermuda shell company, almost double the total from three years before, filings show.
By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011.
Google Inc. logos are displayed for a photograph. Photographer: Andrew Harrer/Bloomberg
The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.
Last week, the European Union’s executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules. Tax evasion and avoidance, which cost the EU 1 trillion euros ($1.3 trillion) a year, are “scandalous” and “an attack on the fundamental principle of fairness,” Algirdas Semeta, the EC’s commissioner for taxation, said at a press conference in Brussels.
‘Deep Embarrassment’
“The tax strategy of Google and other multinationals is a deep embarrassment to governments around Europe,” said Richard Murphy, an accountant and director of Tax Research LLP in Norfolk, England. “The political awareness now being created in the U.K., and to a lesser degree elsewhere in Europe, is: It’s us or them. People understand that if Google doesn’t pay, somebody else has to pay or services get cut.”
Google said it complies with all tax rules, and its investment in various European countries helps their economies. In the U.K., “we also employ over 2,000 people, help hundreds of thousands of businesses to grow online, and invest millions supporting new tech businesses in East London,” the Mountain View, California-based company said in a statement.
The Internet search giant has avoided billions of dollars in income taxes around the world using a pair of tax shelter strategies known as the Double Irish and Dutch Sandwich, Bloomberg News reported in 2010. The tactics, permitted under tax law in the U.S. and elsewhere, move royalty payments from subsidiaries in Ireland and the Netherlands to a Bermuda unit headquartered in a local law firm.
Last year, Google reported a tax rate of just 3.2 percent on the profit it said was earned overseas, even as most of its foreign sales were in European countries with corporate income tax rates ranging from 26 percent to 34 percent.
Foreign Taxes
At a hearing last month in the U.K., members of Parliament pressed executives from Google, Seattle-based Amazon.com Inc. (AMZN) and Starbucks Corp. (SBUX) to explain why they don’t pay more taxes there.
The U.K., Google’s second-biggest market, was responsible for about 11 percent of its sales, or almost $4.1 billion last year, according to company filings. Google paid 6 million pounds ($9.6 million) in U.K. income taxes.
Matt Brittin, Google’s vice president for Northern and Central Europe, testified that the company pays taxes where it creates “economic value,” primarily the U.S.
Still, Google attributes some profit based on technology created in the U.S. to offshore subsidiaries, lowering its U.S. taxes, according to company filings and people familiar with its tax planning. Google paid $1.5 billion in income taxes worldwide in 2011.
‘Fair Share’
In the wake of the parliamentary hearing, the House of Commons issued a report last week declaring that multinationals “do not pay their fair share” of tax. The committee also criticized the U.K.’s tax collection agency, Her Majesty’s Revenue & Customs, for “not taking sufficiently aggressive action” and called on the agency to “get a grip” on corporate tax avoidance.
A spokesman for HMRC said the agency “ensures that multinationals pay the tax due in accordance with U.K. tax law.”
The French tax authority this year proposed increasing Google’s income taxes by about $1.3 billion. The agency searched Google’s Paris offices in June 2011 and removed computer files as part of an examination first reported by Bloomberg last year. Google is cooperating with French authorities and works with them “to answer all their questions on Google France and our service,” the company said.
Italian Audit
In Italy, the Tax Police began an audit of Google last month and recently searched the company’s Milan offices, as well as the offices of Facebook Inc. (FB), according to a person familiar with the matter. “It’s very common for companies to be audited, and we have been working closely with the Italian authorities for some time,” Google said. “So far we have not had any demands for additional tax in Italy.”
Facebook, based in Menlo Park, California, is cooperating with the Italian tax authority and “we take our obligations under the Italian tax code very seriously,” a company spokeswoman said.
In Australia, the country’s assistant treasurer gave a speech last month outlining Google’s tax avoidance strategies.
The use of offshore shelters to avoid corporate taxes has prompted calls for reform in the U.S. as well. The Treasury Department has repeatedly proposed since 2009, with little success, to make it harder for multinationals to bypass taxes by shifting profit into tax havens.
Transfer Pricing
Multinational companies cut their tax bills using “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens and expenses to higher-tax countries.
In Google’s case, an Irish subsidiary collects revenues from ads sold in countries like the U.K. and France. That Irish unit in turn pays royalties to another Irish subsidiary, whose legal residence for tax purposes is in Bermuda.
The pair of Irish units gives rise to the nickname “Double Irish.” To avoid an Irish withholding tax, Google channeled the payments to Bermuda through a subsidiary in the Netherlands -- thus the “Dutch Sandwich” label. The Netherlands subsidiary has no employees.
The Dutch unit’s payments to the Bermuda entity last year were up 81 percent to $9.8 billion from $5.4 billion in 2008. Google’s overseas sales have increased at about the same rate.
Google’s overall effective tax rate dropped to 21 percent last year from about 28 percent in 2008. That compares with the average combined U.S. and state statutory rate of about 39 percent.
