If you want to make a profit in the tech industry, you must make a great product like an iPhone or Google Search, and then find ways to not pay your taxes. If you are Microsoft, you can corner the enterprise market, grow cloud services… and not pay your taxes. And that's what it seems Microsoft has been doing with $315 billion of profit it moved through Bermuda.
According the Guardian, Microsoft Round Island One, a subsidiary of the company based in Ireland, used its status as a resident of Bermuda to avoid paying full taxes. Importantly, Microsoft Round Island One appears to be something of a shell company. It has no employees other than directors and is a tax resident in the tax-free island of Bermuda.
While Bermuda is a territory of the UK, it does not have corporation tax like in the United Kingdom. Of course, the big question is how could Microsoft Round Island One has made $315 billion in profit with no employees and seemingly no output? Moreover, how can it then avoid paying taxes?
This seems to be a case of classic big tech tax dodging. We know the major tech companies find loopholes to avoid paying as much tax as they should. Rarely is it as blatant as what Microsoft appears to be doing here.
One extremely interesting point the Guardian makes is that the profits from the Ireland-based Round Island One ($315 billion) is nearly as much as the whole country's 2020 GDP ($433 billion). It will be interesting to see if Microsoft explains this situation or if any action will be taken against the company.
Silicon Six Tax Issues
Last month, we saw a report that discussed how the Silicon Six companies (Microsoft, Apple, Netflix, Facebook, Google, and Amazon) have bene avoiding paying taxes. According to the Fair Tax Foundation, the companies have paid $96bn less than they should have in tax between 2011 and 2020. The report says there are clear discrepancies in the paid taxes and taxation figures in financial reports.
Globally the Silicon Six have paid $149bn less than they should have if basing payments on headline rates. In total, the companies paid $219bn during those years, which amounts to just 2.6% of their collective revenue during that time ($6 trillion).
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