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Was Microsoft Forced To Pay $136M In Back Taxes In China?
itwbennett writes China's state-controlled Xinhua News Agency said on Sunday that an unnamed international company was forced to pay 840 million yuan ($136 million) in back taxes, as part of a Chinese government crackdown on tax evasion. The Xinhua article simply referred to it as the "M company," describing it as a top 500 global firm headquartered in the U.S. that in 1995 set up a wholly owned foreign subsidiary in Beijing. The details match Microsoft's own background, and no other company obviously fits the bill. Xinhua added, that despite the company's strengths, its subsidiary in China had not been not making a profit, and posted a loss of over $2 billion during a six-year period.
If that's the case I suspect a fairly large license audit on the way...
crazy dynamite monkey
Chocolate evasion.
Was Microsoft Forced To Pay $136M In Back Taxes In China?
Um...who gives a shit. It's chump change to them.
No?
Microsoft should send the Chines Gov't a $136M bill for piracy.
I don't know anythign about chinese law, but if you do, is it against the law for the Chinese government to use software without paying for it?
Are you allowed to sue the Chinese government (under chinese law) for this sort of thing?
One thing you will find a lot on slashdot is the assumption that "US Style" laws are universal.
This is not always the case.
Also, see this as a "local" example.
"In the United States, the federal government has sovereign immunity and may not be sued unless it has waived its immunity or consented to suit."
http://en.wikipedia.org/wiki/Sovereign_immunity_in_the_United_States
Who's to say the chinese gvt doesnt have something similiar?
Not that I've ever been supportive of M$. But perhaps that should be $136B for piracy!
Said Dr Evil. Mwahahahaha
1. MSFT revenue in China is lower than actual software revenue should be, mostly due to non-payment of software licenses (aka IP theft) by Chinese government and military units (half the economy). This has not changed. And probably never will.
2. MSFT is being forced to pay taxes "avoided" in the EU and US as well. The Irish and Luxembourg tax "shelters" are being ripped apart. And Google and Amazon will also be forced to pay those too. It helps when you shame the economic figures by country and point out exactly where they have a shortage and why, and that they know that this is happening.
3. Pay your effing taxes. That includes Mittens.
-- Tigger warning: This post may contain tiggers! --
The issue is not "Irish Tax Shelters". Even without these Microsoft would still be losing money. You are closer on point on the IP theft. This is not so much as a tax, rather it is a fine for Microsoft dropping support for XP, the widely used but rarely paid for OS. Remember, taxes and the laws are not applied in a "neutral" fashion.
299 million slaves pays taxes each year and at the same time most corporation listed on stock exchange pay ????????
NOTHING, NADA, ZERO oh, sorry they pay $1 in taxes.
Only in US, lobbyist will make sure laws are passed to avoid taxes. How do they call it now? Aha, "It's legal not paying taxes"
Priceless!
So it made a profit?
You can lead a horse to water, but you can't make it dissolve.
uh.. last i checked, the USA does not control Ireland, which is where apple/microsoft/etc transfer their profits.
if you want to stop that, invade ireland or establish protectionist trade laws.
You don't need to do that. The US uses domical to calculate taxes, the rest of the world use residence. This caused a gap witch the accountants plunged in. Fixing the US tax code so it is rational would solve the problem.
Or use international treaties to prevent tax havens and this "race to the bottom" of giving free shit to companies.
I believe this is already underway in Europe, although I'm sure big business would love to cast that as protectionism, too.
Ms is constantly cheated over in China like any other western nation. All of the overhead leaves their chinese operations as a huge money loser. Now they have to pay taxes to China and then gets to post a loss on us taxes. Total Insanity
I prefer the "u" in honour as it seems to be missing these days.
McDonalds' was in China in the 90's. There are dozens of other M companies in the Fortune 500. I'm surprised only one fits the profile. Merck, MorganStanley, McKesson, Monsanto, Marriott, Manpower, MGM Resorts, Micron, etc. That was the time to setup in China, I wouldn't be surprised if it was something like MRC Global, Inc and the MS hint was dropped just for headlines.
Sure Microsoft; after you sign this memorandum where you enter into binding agreement to fork over payment for all costs associated with the audit, plus an additional non-refundable fee of 6139000¥ plus a 31390¥ retainer.
Costs to Include payment for some additional vacation time for management and senior staff and the cost of purchasing additional computers, server equipment, software, and gov't employees, labor, overtime hours desired to assist with the audit, and other ordinary expenses.
It actually sounds like Xinhau broke some kind of law or agreement here, just from the way this went down.
Specifically, they disclosed the company by describing it without ever saying its name. They knew everyone would figure out who the company was. But they never would have done that unless they were prohibited from telling you the company. So they broke whatever was prohibiting them from doing that.
It's unlikely Microsoft will sue them for it (not impossible, but unlikely), but no Western company will ever trust that agreement or law again.
This is a classic example of a really *Stupid* move to make yourself seem good in the short term that makes other people less willing to deal with you in the future.
Not really. You're talking about for invidivuals, but the way companies move money around is much more sophisticated than that. Indeed, other european nations are pissed off about the tax shelters in ireland (and other places) because company profits in their countries are also being booked in ireland. Ireland would not change their chicken race to the bottom approach if it had just been about the US. The rest of the EU was getting pissed off at them as well, and EU was about to do something about it had ireland decided not to do something first (which they only did because the rest of the EU was about to fuck them in the ass, which they totally deserved for their epic douschebaggery at a national level).
Nobody will buy your OS there. They'd rather get a bootleg for $5 at a street corner.
Is not giving the company's full name commonly done in this sort of story? I'm wondering if this would be considered impolite in China.
...leave it to china to tax MS for not selling their pirated software to everyone in the country....
China gives all western nation a lesson here: if a government wants to end tax evasion, it can do it.
if you want to stop that, invade ireland or establish protectionist trade laws.
As an American I find both of those options to be quite appealing. I'm going to write my congressman and ask that he do both. We can get right wing war hawks to support invasion, and left wing corporatist to support increasing protection of local business. Even if those businesses happen to be trillion dollar corporations.
“Common sense is not so common.” — Voltaire
Ahh, China... Selective enforcement of the law against foreign companies, whodda thunk it? The world is starting to realize just who you really are.
And to the western firms who thought the Chinese market was a great prospect, you clearly didn't know who you were dealing with. When dealing in mainland China, you're virtually guaranteed to get the short end of the stick. If you do get the long end, it'll be up your ass.
To any western PC moderators who think this is bias, clearly you haven't spent much time in China.
...how a sales department can make a $2 billion loss?
For years we talked about movie accounting as if it was a bad thing, but the multinationals took it as a blueprint. Make something. Doesn't matter where. Sell it to a subsidiary in Ireland for $1. Sell it from that subsidiary to the final country for retail price + 50% (so you don't accidentally make a profit). Ireland subsidiary makes everything, and is the only profitable arm of the company. Bonus points if you set up fake marketing companies that charge more than R&D and production costs combined, but have no relation to the final sale price or number of units sold.
Learn to love Alaska
I personally applaud what China accomplished and hope that it launches similar investigations against every damn multinational corporation operating within their borders who set up foreign owned subsidiaries with one thing in mind--avoid or reduce tax liabilities. The article stated this was simply the first investigation of this type, implying that more are either underway or planned for the future. I applaud China. I applaud the EU for its attempt to correct the sweetheart tax deal entered into by Apple and Ireland. Much more is needed reign in companies like MS, Google and Apple. These companies, and many others, have repeatedly shown the world that they really don't pledge allegiance to any country. Their only allegiance is to money. To gather as much as possible, they have simply become the latest iteration of the greedy carpetbagger. They set up their foreign subsidiaries as tax havens. It was pretty ballsy for Microsoft to claim that over half the profit it earned went to R&D in the US. But then again, it appears that there were few punitive actions taken by China. And without significant punitive actions taken against these money hoarders, there is little for them to lose and much to gain. So the future appears to still favor the greedy...