Little trouble in big China? The Chinese odyssey seems to be coming to an end for Microsoft. With the investigation now concluded, the company can now focus on business in the country.
But not before paying the heavy amount of $140 million in fine.
Local authorities had been investigating the software titan for what they believed was tax evasion. The antitrust case was initiated a few months back and began with raids on Microsoft offices throughout the country. And now we have a verdict.
As Reuters reveals in a new report, citing local media, Microsoft has already admitted to tax evasion and agreed to pay the fine, in full, without filing an appeal.
The report published by the Chinese Xhinhua news agency does not actually mentioned Microsoft by name, instead only referring to a company whose name starts with the latter ‘M’ and that first opened a subsidiary in China in 1995.
Well, how many notably large companies did that, who were under investigation?
Although Microsoft is yet to comment on this, the report indicates that the company employed the same tax dodging schemes that it is accused of in other countries, including home turf, the United States. Pretty standard procedure, actually.
And it involves channeling local sales through foreign subsidiaries.
In this case, Microsoft channeled sales through its offices in Ireland, Singapore and Puerto Rico, while reporting losses in the last six years in China to avoid paying taxes on its profits.
The abovementioned foreign centers posted huge profits, while Microsoft totaled 2 billion yuan (around $325 million) in losses in the past six years in China. Known as the Double Irish arrangement, Microsoft is not the only company that uses this loophole to lower its tax burden.
But it is the first to be fined extensively in China.