Microsoft using 'a web of shell companies' to avoid paying tax, report

CICTAR report tracks billions of dollars in financial flows between firms with no employees

Tech giant Microsoft is accused in a new study by the Center for Corporate Tax Accountability and Research (CICTAR) of using a massive network of subsidiaries around the world to avoid paying billions in taxes in Australia, Britain and New Zealand.

CICTAR is an international corporate tax research centre that unravels the corporate tax web by providing data and analysis.

Cictar says their research indicates that Microsoft does not contribute fairly to funding the public services that are essential to its worldwide workforce and customers, and are sources of huge revenue for the company.

The report tracks billions of dollars in financial flows between firms with no employees and who claim to be based in countries with a reputation for maintaining corporate secrecy, such as Luxembourg, Bermuda, Ireland, Singapore and the Netherlands.

According to the CICTAR report, Microsoft has frequently avoided paying taxes in recent years by shifting profits to companies that are tax-domiciled in Bermuda and other tax havens.

For example, Microsoft Global Finance, an Irish subsidiary with tax residency in Bermuda, consolidated over $103.1 billion in investments in 2020. Despite having an operating profit of $2.48 billion, the company paid no tax in 2020.

Another example is Microsoft Singapore Holdings, which reported dividend profits of $23.82 billion in 2020 but only a $15 tax liability.

"Microsoft boasts of profit margins of over 30% to its shareholders. Yet, in the UK, Australia and New Zealand, filings show returns of 3% to 4%," said Jason Ward, an analyst with Cictar.

"It does not seem credible that these wealthy markets are underperforming so dramatically," he added.

CICTAR says Microsoft deprives the public sector of much-needed funds while earning billions as a government contractor with deals in practically every nation and at all levels of government.

The company has secured governmental contracts worth at least €3.4 billion over the last five years in Britain, the US, Australia and Canada, according to the analysis.

More than 80% of Microsoft's total overseas revenue is "channelled via Puerto Rico and Ireland", and the firm is currently being investigated by tax authorities in the US, Australia and some other countries.

When contacted by the report's authors, Microsoft responded that it complied with all local norms and regulations in the countries where it conducts business.

"We serve customers in countries all over the world and our tax structure reflects that global footprint," it added.

According to CICTAR, corporate tax evasion by the big tech firms has a significant impact on public finances.

The "Silicon Six" (Facebook, Amazon, Apple, Google, Netflix, and Microsoft) paid $149.4 billion less in taxes from 2011 to 2020 than the headline rate of tax, according to a new research by the Fair Tax Foundation.

"Governments worldwide can and should demand that Microsoft open its windows to public scrutiny, and prove it demonstrates fair tax practices, before any new contracts are awarded," CICTAR said.