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An Irish subsidiary of Microsoft made a profit of $ 315bn (£ 222bn) last year, but did not pay corporate tax as it is “resident” for tax purposes in Bermuda.
The profit generated by the company, Microsoft Round Island One, is equivalent to almost three-quarters of Ireland’s total gross domestic product (GDP), even though it has no employees.
The subsidiary, which charges license fees for the use of copyrighted Microsoft software around the world, posted an annual profit of $ 314.7 billion in the year to the end of June 2020, based on accounts filed with the Office. Register of Companies of Ireland. Its earnings jumped from just under $ 10 billion the previous year and compared to Ireland’s GDP in 2020 of € 357 billion ($ 437 billion).
The revelation of how much money Microsoft has saved by routing through Ireland comes as finance ministers around the world try to strike a deal to tackle multinational tax evasion in London on Friday, ahead of the G7 meeting in Cornwall at The end of this month.
The United States has proposed addressing the problem of transferring profits to low-tax countries by introducing a global minimum corporate tax rate of 15% on the profits of multinational companies in all jurisdictions. It is expected to be endorsed in principle by the finance ministers of the world’s seven largest economies at the G7 meeting. However, on Thursday, Cyprus, which like Ireland has a 12.5% corporate tax rate, threatened to veto the EU’s adoption of President Joe Biden’s proposal.
Politicians on both sides of the Irish Sea attacked Microsoft for “blatantly and blatantly refusing[ing] pay taxes ”and said the case highlighted why urgent coordinated international action was needed to address the epidemic of“ unethical, immoral and unjustifiable ”tax evasion by multinational companies.
Microsoft Round Island One, whose registered address is at an office of the Matheson Law Firm, on the River Liffey in central Dublin, states in its accounts that it “has no other employees than directors.” On your tax return it says, “As the company is a Bermuda tax resident, no income tax is charged.” Bermuda does not levy corporation tax.
The company paid a dividend of $ 24.5 billion to Microsoft Corporation during the financial year, followed by an additional special dividend of $ 30.5 billion.
Margaret Hodge, a longtime Labor MP who has campaigned against tax evasion, said: “Not surprising, but still shocking, that enormously wealthy global corporations openly, shamelessly and blatantly refuse to pay taxes on profits. they get in the countries where they do business.
“It is arrogant behavior by large organizations like Microsoft that shows how vital and necessary President Biden’s global corporate tax plan is. The UK must unreservedly seize this opportunity to accept Biden’s proposals. “
Ged Nash, finance spokesman for the opposition Irish Labor Party, described Microsoft’s use of Ireland’s lax tax laws as “extraordinary.”
“A system that allows agreements like this to exist is unethical, immoral and unjustifiable and must change radically,” he said. “This does not suit the Irish citizens and it does not suit me. This should prompt Ireland and the international community to support the global demand for meaningful corporate tax reform. “
Nash said Microsoft had been a good employer in Ireland, but this should not give the company a license to exploit mysterious tax structures. “From a reputation standpoint, this is very, very bad for Ireland.”
The US Senate has previously investigated Microsoft and Ireland for the use of Microsoft Round Island One and other Irish subsidiaries to reduce taxes that might otherwise be owed in the US or elsewhere.
A former senator, Carl Levin, who was chairman of the permanent subcommittee on investigations, said in 2012 that Microsoft and other technology companies were “probably the number one user of these offshore entities to transfer intellectual property.” The committee said Microsoft began in the 1990s to establish a “complex network of interrelated foreign entities to facilitate international sales and reduce” taxes.
A company spokesperson said: “Microsoft has been operating and investing in Ireland for over 35 years and is a long-time contributor, employer and contributor to the economy. Our organizational and tax structure reflects our complex global business. We fully comply with all local laws and regulations in the countries in which we operate. “
Paul Monaghan, executive director of the tax transparency campaign group Fair Tax Foundation, said: “The tax aggression that Microsoft displays and that Ireland facilitates is incredible.
“We have a holding company here that has made a profit of $ 314.7 billion, not much less than the whole of Ireland’s gross national domestic product. Although dividends of $ 55 billion were paid to shareholders, not a penny of tax has been paid.
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“This race to the bottom in tax competitiveness is really unpleasant, especially at a time when countries around the world are trying to rebuild their public services after Covid. It is no longer defensible for a decent and responsible nation state to stand up and proclaim its democratic right to produce CFCs or lead additives, and limit the impact on the rest of the world. The same goes for enabling tax avoidance and tax evasion, which are toxic pollutants of the world’s financial systems. “
Conor O’Neill of Christian Aid Ireland said the disclosures on Microsoft’s tax affairs shed a new spotlight on Irish tax policy that “has been designed precisely to facilitate this kind of evasion.”
“Successive [Irish] Governments have taken a whack-a-mole approach to reform: if one scheme closes, another opens to replace it. Extensive tax breaks and rebates still allow some of the world’s most profitable companies to channel their profits through Ireland and protect them from tax, and the fundamental policy of facilitating tax evasion remains in place. “
O’Neill said the notorious tax evasion costs developing countries more than $ 400 billion a year, money that is urgently needed to invest in health and education. “By way of comparison, this is more than double the annual total awarded in official foreign aid worldwide,” he said. “Ireland’s role is doubly disappointing for this reason – our hard-earned reputation as a voice for global justice and development is seriously undermined by it.”
Justin Thacker, Director of Church Action for Tax Justice, said: “The way large multinationals engage in tax evasion globally is a moral and social scandal. More than 10,000 people continue to die daily from Covid around the world. Yet our largest firms continue to evade the taxes they owe. That money could be used to solve this pandemic in every country in the world. So if we really want to rebuild better, we could start by fixing our global tax system to make sure everyone pays their fair share. “
Giant US tech companies known as Silicon Six – Microsoft, Amazon, Facebook, the owner of Google, Alphabet, Netflix, and Apple – have been accused of paying $ 96 billion less in taxes over the past decade than the figures they cite in your annual financial reports. it would seem to imply.
The Guardian reported this week that companies paid $ 219 billion in income taxes over the past decade, equivalent to 3.6% of their total revenue of more than $ 6 trillion. Income tax is paid on profits, but the researchers said Silicon Six companies were deliberately shifting revenue to low-tax jurisdictions to pay less taxes.
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