Microsoft Reaches Tax Agreement with Australia
Microsoft says iicrosoft says it has settled an Australian tax audit, a deal that follows criticism of the company’s practice of lowering its local tax payments by routing sales made to Australian customers through Singapore.
The settlement was disclosed by Daniel Goff, Microsoft’s corporate vice president of worldwide taxes, in testimony Tuesday before an Australian Senate panel on tax avoidance.
Goff didn’t detail the settlement’s terms during the public hearing, asking instead to brief lawmakers confidentially, but The Australian newspaper reported Microsoft’s settlement is believed to include hundreds of millions of dollars in increased payments.
Microsoft declined to comment on the settlement’s terms, with a spokeswoman saying only that it granted “certainty” for the tax years from 2011 to 2022.
The Australian Taxation Office (ATO) didn’t immediately comment.
The Australian government has cracked down on big global companies that reduce their local tax payments by attributing sales made to Australian consumers to foreign units, and thereby avoiding Australia’s 30 percent tax rate on corporate profits.
Tuesday brought the latest parliamentary hearing on the matter, which, in addition to Microsoft’s Goff, also included testimony from Apple, Facebook, Google and IBM.
During a similar hearing in 2015, Microsoft disclosed that just 5 percent of its sales to Australian consumers during the most recent fiscal year were subject to Australian income taxes. The rest was channeled through the Singapore entity that technically handles the bulk of Microsoft’s sales across Asia.
The Redmond-based company uses similar mechanisms to channel sales around the world to countries with low or no taxes.
Before Australia’s anti-tax-avoidance law, Google had been booking its Australian advertising revenue in Singapore, and the majority of Facebook’s sales in the country were routed through Ireland, representatives for those companies said Tuesday, according to The Sydney Morning Herald.
ATO Commissioner Chris Jordan told senators on Tuesday that audits and anti-tax-avoidance legislation passed last year had forced multinational companies to collectively report an additional $7 billion in sales in Australia for tax purposes.
“We were fed up with those corporate taxpayers choosing to engage in behavior amounting to gaming and stooging tactics to avoid their tax obligations,” Jordan said, according to Australian media reports.
