IRD opens up Microsoft’s accounts
Microsoft NZ, the local unit of the world’s biggest software company, is being audited by the Inland Revenue Department regarding transfer pricing, a pract i ce t hat can be used by multinationals to minimise tax.
The transfer pricing audit covers Microsoft NZ’s accounts for the years 2013 to 2015 and comes as the IRD widens its net to require all foreign-owned firms with annual turnover of more than $30 million to submit an annual basic compliance package which details group structure, financial statements and tax reconciliations.
The threshold was previously $60m in annual sales, involving 600 taxpayer groups of which half were foreign-owned. Lowering the bar will add a further 300 foreign-owned companies.
A Microsoft spokesman said the company was “working with the IRD to complete the transfer pricing audit of the company as required, there is nothing more we can share about that at this time”.
Microsoft “complies with the law and we pay our taxes in New Zealand. We believe tax is an issue that should be addressed at the global level, but having said that, we abide by the laws in all jurisdictions in which we operate”, he said.
Last year, the department launched a number of audits on the tax arrangements of global tech firms and the reported at the time that an IRD briefing to Revenue Minister Michael Woodhouse said the audits were triggered by “anomalies” thrown up by close monitoring of multinationals.
The briefing was from IRD manager of i nternational revenue strategy John Nash, who told the that such audits could be “fairly intense trench warfare” and would take several years to resolve.
Transfer pricing refers to the prices that divisions of a large company charge each other for goods and services and has been used by multinationals to shift profits to low-tax jurisdictions from countries with higher tax rates.
Australia is among nations planning to introduce a diverted profits tax, commonly known as the “Google tax”. Microsoft New Zealand says in its 2016 financial statements, released this week, that its directors and their legal advisers “believe we have adequately assessed and provided for our tax positions. The ultimate outcome of the tax audit cannot be reliably estimated at this time”. IRD’s Nash was not available. A spokesman said it was widely known that the IRD had focused on global technology companies in recent years and pointed to the
a guide that sets out requirements of the nation’s tax law.
Microsoft NZ had net profit of $8.1m in 2013 after paying tax of about $3.9m, on revenue of $78.5m.