Microsoft is preparing to challenge a request from the US tax authority for an additional $28.9 billion in retroactive taxes spanning the years 2004 to 2013. The Internal Revenue Service (IRS) has been scrutinizing the way the tech giant distributes its profits across various nations and regions. However, Microsoft contends that the issues raised by the IRS are pertinent to the past and do not align with its present financial practices.
There has long been a contentious debate surrounding the underpayment of taxes by major corporations in developed nations. Tech behemoths have often come under fire for reporting diminished profits in high-tax jurisdictions and inflated profits in low-tax areas to mitigate their tax obligations.
In a disclosure filed with securities regulators, Microsoft revealed that the IRS is pursuing an additional tax payment of $28.9 billion, coupled with penalties and accrued interest. The company insists that it has consistently adhered to the IRS’s guidelines and dutifully paid taxes owed within the United States and worldwide. Microsoft also anticipates a potential reduction in taxes owed following the audit, citing tax legislation enacted during the tenure of former President Donald Trump.
Microsoft is not the sole tech giant facing calls for heightened tax contributions. American companies like Amazon and Facebook have also encountered comparable demands to augment their tax payments.
This year, Microsoft has faced additional scrutiny from US authorities. In June, it consented to pay a $20 million settlement to the Federal Trade Commission (FTC) after being found guilty of illicitly collecting data from minors who created Xbox accounts.
Nevertheless, Microsoft may soon secure a triumph in its pursuit to acquire Activision Blizzard, the creator of the popular Call of Duty franchise, for a substantial sum of $68.7 billion, as the deal is expected to be finalized in the near future.
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