Microsoft facing a hefty $29 billion tax bill for ‘transfer pricing’ practice

The United State’s tax authority, the Internal Revenue Service (IRS), has presented Microsoft a hefty $28.9 billion tax fine, along with penalties and interest, on the company’s allocated profits dating the years between 2004 and 2013.

The IRS has been auditing the multi-trillion software company and how it allocates profits among countries and jurisdictions. Other tech companies such as Amazon and Facebook have been under scrutiny for similar reasons.

The BBC reported that governments across the world have grown concern over international corporations not paying enough tax in developed nations, a practice known commonly as transfer pricing. “Tech giants have been criticised for reporting lo wer profits in high-tax countries and higher profits in lower-tax jurisdiction to minimise their tax burden.”

The company stated that it has always followed IRS’ regulations and paid taxes both in the US and other countries. For that reason, Microsoft reached a decision to appeal internally, and if necessary, in courts.  

Nonetheless, Microsoft added that since the period IRS referred to, the company has changed its practices.

Microsoft said that it was under the impression that any taxes that it owed after the audit would be reduced by up to $10 billion, as per tax laws passed under the Trump administration.