Friday 24 November 2017

Microsoft owes €777m in back taxes, claims Danish government

Johan Ahlander and Peter Flanagan

Denmark wants Microsoft to pay 5.8bn Danish krone (€777m) in back taxes in one of the biggest tax cases in the country's history, local media has reported.

The Danish tax authority is in negotiations with Microsoft over unpaid taxes stemming from the 10.8bn krone takeover of Danish software company Navision in 2002, Danish Radio DR said, quoting unnamed sources.

The tax authority claims Microsoft sold the rights to Navision's successful business planning software, now under the name of Dynamics NAV, at below market value to a subsidiary in Ireland, DR said.

As a result the tax authority is claiming 5.8bn krone in back taxes and interest from sales of Dynamics NAV, the public service radio broadcaster said yesterday.

A Microsoft representative in Denmark declined to comment on the report as did the Danish tax authority.

The Danish government proposed in February to gradually lower the corporate tax rate to 22pc from 25pc, while corporate tax in Ireland is 12.5pc.

A recent US government report said US multinational companies reported 43pc of their overseas profits in tax havens like Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland in 2008.

Spat

The spat is another sign that European countries are losing patience with Ireland's tax regime.

There was widespread anger late last year when it was revealed that Google avoided about $2bn in worldwide income taxes in 2011 by shifting $9.8bn in revenues through Ireland into a Bermuda shell company, almost double the total from three years before, filings show.

By legally funnelling 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 80pc of Google's total pre-tax profit in 2011.

Governments in France, the UK, Italy and Australia are probing Google's tax avoidance as they seek to boost revenue during economic doldrums.

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.

Google Ireland last year reported profits of just €2.1m on revenue of just under €12.5bn. The company paid royalties of a little more than €9bn to a Bermuda based firm.

Last December the European Commission advised member states to create blacklists of tax havens and adopt anti-abuse rules.

Irish Independent

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