Microsoft in $28.9 billion tax battle with IRS over transfer pricing: Tech giant takes on taxman

Priya Walia

In a stunning revelation, the Internal Revenue Service (IRS) says that Microsoft owes a staggering $28.9 billion in back taxes to the U.S. Treasury. The unexpected disclosure came to light when Microsoft filed a securities report on Wednesday.

The tremendous sum demanded by the IRS, which includes penalties and accrued interest, is connected to an ongoing investigation regarding Microsoft’s allocation of profits across various countries and jurisdictions. The scrutiny, spanning from 2004 to 2013, revolves around a contentious practice known as transfer pricing.

Detractors argue that companies employ this strategy to minimize their tax liability, reporting lower profits in high-tax nations and higher profits in jurisdictions with lower tax rates, or “tax havens.”

Unsurprisingly, Microsoft flatly refutes the allegations put forth by the IRS. The technology titan maintains that it diligently adheres to all IRS regulations and vows to challenge the agency’s decision. The software giant intends to challenge the notices at administrative and judicial levels.

Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years

Defending its position, Microsoft emphasized that the IRS’s proposed adjustments, which total $28.9 billion, fail to account for up to $10 billion in taxes already paid by the company. This discrepancy further fuels the fiery dispute between the tech giant and the tax authority.

Despite the ongoing uncertainty and looming legal battles, the tech giant based in Redmond has stated that it is resolute in fulfilling its tax obligations. The company further added that it has consistently adhered to domestic and international tax laws, ensuring the proper payment of taxes in the United States and globally.

We believe we have always followed the IRS’s rules and paid the taxes we owe in the U.S. and around the world.

As the revelation reverberates through the business and technology sectors, the fate of Microsoft’s tax liability hangs in the balance. Only time will reveal the ultimate resolution of this high-stakes confrontation, with the company steadfastly determined to defend its adherence to tax regulations throughout the complex saga.