Microsoft avoids paying £159 million UK tax every year

Microsoft has been added to the list of companies operating within the UK that has used a legal loophole to avoid paying corporation tax. According to reports Microsoft avoids paying £159 million worth of tax every year, and is thought to have avoided tax on £1.7 billion of online sales in the UK.

Microsoft puts transactions through Luxembourg to sidestep any taxes it would normally have to pay, according to The Sunday Times. The Luxembourg HQ has a small number of staff who then transfer the royalties to Microsoft's European HQ in Ireland, with dividends being directed to the parent company in Bermuda.

Microsoft is the latest in a growing number using this method to avoid UK tax. Starbucks, Amazon, AOL and eBay have also reportedly been found to use similar techniques. While what they're doing is legal it isn't likely to sit well with UK taxpayers.

A spokesman from Microsoft said:

Microsoft pays all due taxes, as required by law, worldwide. Microsoft subsidiaries are fully subject to tax in the jurisdictions in which we operate. We are regularly audited by major tax jurisdictions, which ensure the company is complying with all rules and regulations.

Source: The Sunday TimesMail Online

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56 Comments

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Good for them. If countries are going to create excessive taxes on job creators to try to supplant their economies rather than reducing expenses as they should be doing, companies should take those earnings and jobs elsewhere.

In other news, most American's evade local taxes by buying online... Yes, I used evade as you suppose to report and pay local taxes for online purchases.

Seems, once again, the staff/writers get way with stuff we viewers can't or stuff we get warnings over. Articles by the staff of piracy/hacking with often explicit instructions "slide" through the system, but anyone else does it, oh noes, ban ban warn warn.

The entire Micro$oft/M$ thing has run its course, like crApple and other nicknames. Kids will be kids I guess.

Modifying the logo is poor form. Maybe you need to drop the unprofessional term from the site and start getting real with your reporting.

Nashy said,
Modifying the logo is poor form. Maybe you need to drop the unprofessional term from the site and start getting real with your reporting.

I think it reflects the article well. What do you think is poor form about it exactly?

Edited by xstex, Dec 10 2012, 4:44am :

Nashy said,
Modifying the logo is poor form. Maybe you need to drop the unprofessional term from the site and start getting real with your reporting.

Looks to me like the author needs to get their computer's clock fixed. It's not the late 90's anymore. That's not clever or funny, it's downright pathetic.

xstex said,

I think it reflects the article well. What do you think is poor form about it exactly?

It used to be a way to bag Microsoft.

You modified a corporate logo in an attempt to be funny. It's not professional, and it makes the article look immature IMO. To the point where I won't read it.

Nashy said,

It used to be a way to bag Microsoft.

You modified a corporate logo in an attempt to be funny. It's not professional, and it makes the article look immature IMO. To the point where I won't read it.

Concur 100%. If the author has an issue with critical feedback on his/her article then I would also suggest they quit writing articles.

xstex said,

I think it reflects the article well. What do you think is poor form about it exactly?

How old are you, 10? Seriously, the quality of articles here is already dropping fast, we don't need another childish writer who can't even check the facts.

Drossel said,

How old are you, 10? Seriously, the quality of articles here is already dropping fast, we don't need another childish writer who can't even check the facts.

I agree.

Are you serious? Do you think the red writing of your username puts you above criticism or something.

Your one argument is that you think it reflects the article. You're modified a corporate logo because you think it's funny. It's not funny, now when more than just one person tells you that, you get even more childish.

You're not typing in the forums now, this is front page news. Grow up you child.

It's not the company's fault for there being a loophole. Seems pretty convenient for the legislators to pin it all on the company though. Big bad business when it should big incompetent government.

Xenosion said,
It's not the company's fault for there being a loophole. Seems pretty convenient for the legislators to pin it all on the company though. Big bad business when it should big incompetent government.

While it is indeed legal, it still makes companies look like jerks to me. No and not just MS.

xstex said,

While it is indeed legal, it still makes companies look like jerks to me. No and not just MS.

Companies look like jerks for abiding by the letter of the law? Neowin authors who post troll bait articles like this one look like jerks to me.

xstex said,

While it is indeed legal, it still makes companies look like jerks to me. No and not just MS.

So now it's not even enough to follow the law? These companies need to view these governments like charities too? Come on...

If the UK wanted those jobs and money to be in their country, they should have created tax laws that encouraged that. They didn't, so now they'll cry about it rather than correct it. I applaud any company that takes their jobs and money to countries that actually want them there.

rfirth said,
Better question, what large international company isn't doing this?

Very little, fact is high level decision makers should face big punishments. HBOS in the usa was found guilty of not taking enough action to stop money laundering. The company got a big bill but no person was held accountable. Jail time for bad upper management should be introduced.

REM2000 said,
Costa coffee in the uk

Well, someone needs to tell their board of directors there are ways to increase revenues, and reduce the tax burden they are currently under.

Neowin troll fail. Writing about Brittish Pounds, but writing the name with a dollar sign.

And why, when we have seen similar articles about Google and Apple, did we not see a big Goog£€ or App£€ graphic?

nohone said,
Neowin troll fail. Writing about Brittish Pounds, but writing the name with a dollar sign.

I'm fully aware one that's a dollar sign, and I don't see any reason to change it. It really isn't a big deal.

xstex said,

I don't care that it's a dollar sign, the point of the article is the text. Second question, because one person doesn't write all the articles.

Then the text is inaccurate, at least according to many of the people that comment around here. Quite often we see a headline such as "Microsoft did X" and then included in the text of the article it will state that other companies did the same. So if it is inaccurate (some people really don't know what that word means, but I am just repeating it) for Microsoft to be singled out when it is a positive article, then the article must be "inaccurate" when it is a negative article.

And I expect all future articles to have it spelled Goog£€ and App£€

nohone said,

Then the text is inaccurate, at least according to many of the people that comment around here. Quite often we see a headline such as "Microsoft did X" and then included in the text of the article it will state that other companies did the same. So if it is inaccurate (some people really don't know what that word means, but I am just repeating it) for Microsoft to be singled out when it is a positive article, then the article must be "inaccurate" when it is a negative article.

They weren't singled out. This is a website mostly about Microsoft and the news broke today Microsoft does it also, I even mention other companies who have done it in the past.

xstex said,

They weren't singled out. This is a website mostly about Microsoft and the news broke today Microsoft does it also, I even mention other companies who have done it in the past.

The response was not about the article, but people who comment here. As I said, when we see a positive article and only Microsoft is mentioned in the title but not Goog£€ or App£€ even though their name appears in the article, then people around here start writing that the article is inaccurate because the other companies are not in the title.

nohone said,

The response was not about the article, but people who comment here. As I said, when we see a positive article and only Microsoft is mentioned in the title but not Goog£€ or App£€ even though their name appears in the article, then people around here start writing that the article is inaccurate because the other companies are not in the title.

Sorry misread. But yes this article is about the latest news, so to name every other company that has done it in the past is ridiculous.

xstex said,

They weren't singled out. This is a website mostly about Microsoft and the news broke today Microsoft does it also, I even mention other companies who have done it in the past.

Agree. Too many fanyboys getting upset over this when it don't sound bias and hasn't singled out MS. You should have mentioned Apple though, they're probably the worst for this stuff.

nohone said,

Neowin troll fail. Writing about British Pounds, but writing the name with a dollar sign.

And why, when we have seen similar articles about Google and Apple,
did we not see a big Goog£€ or App£€ graphic?


That would look even more stupid, as those company names aren't spelt AppEE or GoogEE.

DJGM said,

That would look even more stupid, as those company names aren't spelt AppEE or GoogEE.

£ -> Stands for the Pound Sterling
€ -> Stands for the Euro

£ is an L, and not an E.

Do NOT patronise me. I know very well what the £ and € symbols mean. Especially the £,
since I am a Brit, and I've been using it my entire life ... except for holidays overseas.

"£ is an L, and not an E."
Don't be so bloody ridiculous! If you're going to use the £ symbol in place of any letter
of the alphabet to emphasise a word in relation to money, the £ symbol is best placed
where the capital letter E would usually be placed, since the £ symbol far more closely
resembles the capital letter E, than the capital letter L.

Better still, don't replace any letters with currency symbols ... it's futile, and looks daft!


P.S.
If you still think the £ symbol looks like the letter L, you need to get your eyes tested!

There have been many cases of the use of the £ symbol in place of the letter L. For instance, according to Wikipedia "In 1872, Ambrose Bierce referred to the California Governor as ₤eland $tanford."

The symbol $ in the original meaning does not in any way resemble the letter s, but people use it as a derisive way to represent Microsoft's supposed greed. But when we have companies that will bring law suits because someone made a device that is square, deny companies from publishing software because they want a few extra dollars without doing any work themselves, they and their fans endlessly brag about how much money they have, and so much more, trying to use a currency symbol in those company names, well, we cannot have any of that.

aviator189 said,
They might as well put the hundreds of other companies on that list. It isn't just microsoft.

Of course, which is why I mentioned others.

aviator189 said,
They might as well put the hundreds of other companies on that list. It isn't just microsoft.

Starbucks has already backed down from doing this as a result of public pressure.

Meph said,

Starbucks has already backed down from doing this as a result of public pressure.

Yep. Also seems to be some kind of idea that most companies do it. They really don't.

Meph said,

Starbucks has already backed down from doing this as a result of public pressure.

not true, they said they will pay £10/yr in tax even though they should be paying WAY more than that and aren't going to be paying their ~£200m tax that they owe from the past 13yrs.

torrentthief said,
not true, they said they will pay £10/yr in tax even though they should be paying WAY more than that and aren't going to be paying their ~£200m tax that they owe from the past 13yrs.

Oh. And just when I thought things were improving.

xstex said,
Yep. Also seems to be some kind of idea that most companies do it. They really don't.

Name one Company that is publicly traded that has a board of directors that doesn't.
The Company you named is the one not satisfying its Shareholders demand for profits.

Every big company does... We've known it for years but as usual HMRC doesn't care less but is more than happy to push/sue/imprison the little man that tries to avoid paying £10 on his tax bill though.

n_K said,
Every big company does... We've known it for years but as usual HMRC doesn't care less but is more than happy to push/sue/imprison the little man that tries to avoid paying £10 on his tax bill though.

Not many big companies do it actually.

xstex said,

Not many big companies do it actually.


Really? Amazon, Apple, Starbucks, Microsoft, Banks, Insurance companies, Rich celebrities, Facebook, Ebay, Google, Vodafone, HMV (ships via guerysey), Tesco/Asda/Sainsburys (ship alcohol from a depot in england to scotland to avoid tax)...

xstex said,

Not many big companies do it actually.

Well if companies can, and they will, find a loophole... they will use it to their advantage. There is no sense paying something you technically don't have to, like this one.
many companies strive to find loopholes.

n_K said,

Really? Amazon, Apple, Starbucks, Microsoft, Banks, Insurance companies, Rich celebrities, Facebook, Ebay, Google, Vodafone, HMV (ships via guerysey), Tesco/Asda/Sainsburys (ship alcohol from a depot in england to scotland to avoid tax)...

I mention some of those in the article. Also yes those are major ones, but no, most don't, I'm sure you could easily name more than that, that have not been found to be doing it.

But anyway, it really doesn't change the tone of the article. Microsoft is the latest to be found to be doing this sort of thing, so it gets reported on. That's how it works.

xstex said,
Not many big companies do it actually.
This is simply not true.

Every single major name that I can think of in the technology business has been caught doing this. There are certainly major businesses that do the right thing and don't dodge taxes, but as long as politicians keep allowing it to be legal, then it's in the best interest of businesses to dodge the taxes because their competitors most likely are too.

Apple is doing the same in the US by using a company in Nevada, and Google only paid 2% the last time that I noticed, within the US. This is not meant to be an excuse for Microsoft, but it does go against the "Not many big companies do it actually" line, which is wrong.

It is such a widespread problem that this is largely the reason that there is regularly talk of a tax holiday within the US that would at least greatly reduce the amount of tax owed by companies when they simply transfer money held outside of the US, back into the US (which would be taxed at 35% otherwise).

pickypg said,
This is simply not true.

Every single major name that I can think of in the technology business

I was never just talking about technology companies. The fact is most large companies trading in the UK do not do it. I'm not disagreeing with anything else you said, I'm aware it's a problem.

xstex said,
I was never just talking about technology companies. The fact is most large companies trading in the UK do not do it. I'm not disagreeing with anything else you said, I'm aware it's a problem.
I'm not acquainted with the UK goings-on, as I am in the US, but I would be honestly surprised if other companies weren't doing it outside of the tech industry. They definitely are in the US thanks to the overly complicated taxcode filled with loopholes. Regardless, you got me interested:

http://www.businessinsider.com...n-tax-dodging-probe-2012-11

http://www.pharmatimes.com/mob...s_to_dodge_UK_tax_bill.aspx

Starbucks (£8.6 million since 1998 against £3.1 billion), Google (£3.4 million total in 2011 despite 33% profit on $4 billion [£825 million of profit], which means they paid proportionately more than Starbucks by £4 million), Amazon (less than £1 million in 2011 with $5-7 billion in revenue [not profits]), and Pfizer (no taxes paid in 2011 by claiming an operating loss in the UK, which may be real, but the claim is that it wasn't) are in very different industries.

This article should be about the epidemic within the tech industry (as this is a tech site), and it shouldn't be limited to the UK. Microsoft is doing this within the US, as-is the rest of the tech industry, and it would be nice to see recent, real numbers linked against the whole lot of them in one place. It's also a bit disingenuous to act like it's not happening outside of the tech industry as well. A lot of the pushback in the comments relates to the fact that you somewhat oddly picked names from the list and made this seem like a very anti-Microsoft article in particular even though the articles referenced were about much more, using Microsoft as simply the headline:

The Sunday Times said,
Some of America's biggest corporations -- including Microsoft, Amazon, Apple and Starbucks -- face growing demands to pay a fairer share of tax in Britain. Starbucks said last week it would pay £10m in corporation tax in each of the next two years.

Mail Online said,
Luxembourg's favourable tax laws have enticed a number of companies to set up headquarters there, including Amazon, Skype, Facebook, eBay, AOL and Apple.

I think this is really brunt of the seeming outcry on the article. It seems odd that you would look at both lists and add both eBay and AOL in lieu of both Facebook and Apple.

Edited by pickypg, Dec 10 2012, 6:05am :

xstex said,

I was never just talking about technology companies. The fact is most large companies trading in the UK do not do it. I'm not disagreeing with anything else you said, I'm aware it's a problem.


http://www.hmrc.gov.uk/campaigns/news.htm
Plumbers, electricians, builders, doctors, etc.
5,500 'offshore accounts' disclosed tax under the voluntary tax thing HMRC ran in 2007.
And you're still convinced that 'the majority of companies do not escape paying tax'... Get real.

n_K said,

http://www.hmrc.gov.uk/campaigns/news.htm
Plumbers, electricians, builders, doctors, etc.
5,500 'offshore accounts' disclosed tax under the voluntary tax thing HMRC ran in 2007.
And you're still convinced that 'the majority of companies do not escape paying tax'... Get real.

He said "Most Large Companys"

The vast majority of major european companys will do it. It makes financial sence to base your head quarters in the country with the lowest rate of tax. These businesses don't make billions in profit they don't need to pay.

The majority of plumbers, electricians, builders, doctors and small to medium businesses not founded in the UK however making profits their will most likely be doing the same thing especially if they have also have a presence in Europe.

Most of the professions you listed can't afford to have an address in the Netherlands as well as pay staff to man, maintain and run accounts at said address to avoid paying what will amount eventually to a few thousand in corporation tax.

When that potential is 100s of thousands to millions and you have builders, plumbers etc all over europe then yes your going to be no doubt doing it.

Not every company is guilty no however corporation tax as a self declaring tax is largely a joke anyway. You can make your bottom line whatever you want and make whatever claims to profits you like and 99 out of 100 of them wont be checked. The cost of checking even a fraction of companys accounts would wipe out what was made by the tax.

Edited by Unplugged, Dec 10 2012, 10:56am :

xstex said,

Not many big companies do it actually.

From your own article:

Starbucks, Amazon, AOL and eBay have also reportedly been found to use similar techniques.

And that's hardly an extensive list, but all big companies that allegedly do it. lol