Microsoft’s surprise $29bln tax bill

The figure, which Microsoft disputes, stems from a long-running IRS investigation into how Microsoft allocated its profits among countries and jurisdictions in the years 2004 to 2013. Some say companies frequently use this accounting flexibility to minimise their tax burden by reporting lower profits in high-tax countries and higher profits in lower-tax jurisdictions. Microsoft has a market capitalisation of $2.5 trillion and $111 billion in cash.

(AI Video Transcript)

Microsoft

Microsoft, a tech giant, recently received a hefty tax bill of $28.9 billion from the U.S. Treasury, which includes fines and fees. However, Microsoft is disputing this amount. The reason behind this tax bill is an investigation conducted by the IRS to determine how the company distributed its profits across different countries and jurisdictions between 2004 and 2013. Critics claim that companies often manipulate their profits by reporting less earnings in high tax countries and higher earnings in regions with low tax rates.

Microsoft stocks

Interestingly, despite this news, Microsoft's stock managed to gain 0.5% after the market closed. It will be fascinating to see how the stock performs the next morning when markets open. In response to the tax bill, Microsoft plans to appeal the decision, but this process is likely to take several years to resolve. It's important to note that Microsoft is an incredibly valuable company, with a market capitalization of a staggering $2.5 trillion and a cash reserve of $111 billion as of June 2021.

To understand the significance of this tax issue, let's take a step back and look at Microsoft's growth over the years. Between 2004 and 2013, when the investigation period occurred, Microsoft was much smaller in size compared to its current stature. This information gives us some context regarding the circumstances surrounding the tax bill. Investors will be attentively observing the developments as the stock market opens at 9 am.