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Tuesday, March 19, 2013

Microsoft Owes $1 billion in Europe's Taxes

It recently turned out that Steve Ballmer had skimped on paying Danish taxes called Danegeld. The latter is what civilized nations pay to the government in order to make sure that they don’t get invaded by Vikings. They say that the last person in England who avoided paying these taxes was Aethelred the unready, and it didn’t end well for him.

According to the local press, Microsoft owes the Danish Treasury about a billion dollars in what appeared to be its largest tax avoidance case. In the meantime, the country’s government is trying to work out a way of getting its paws on its money without having to pillage New York, like it did plain old York. If Denmark manages to squeeze the cash out of the software giant, it could finance a new super hospital, build the next Silkeborg Motorway or pay salary to 15,000 teachers.

Everything started when the software giant acquired the Danish IT outfit Navision. Microsoft set the price of the rights to the Navision program much lower than the market level and finally let its Irish subsidiary purchase the rights of its Danish subsidiary.

In other words, the value of the Danish company was made too small to be taxed. Indeed, if the software company had its way it would get a refund. The statistics say that Microsoft’s Danish subsidiary previously earned $11 billion, which means the taxes due should be almost $5 billion plus interest of $0.8 billion. But Ireland taxes are much lower than those of Denmark.

In response, Microsoft claims it has obeyed all the rules, but the company received a nasty surprise after it got its tax bill and a following Danish investigation. Apparently, the software giant has done a sterling job to hide its money from the tax authorities for years now and managed to exploit every loophole it could find. Nevertheless, with most European countries short of cash, and other tax payers bled dry, multinational corporations are supposed to finally be told to stop being bludgers. Let’s see if there’s any result.

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