Microsoft might owe the Danish tax man $1bn

SOFTWARE DEVELOPER Microsoft reportedly is being asked to pay $1bn in back taxes to the Danish government.

Microsoft purchased Danish software outfit Navision in 2002 for $1.88bn. Danish Radio station DR claims that Denmark's tax authorities are now in talks with Microsoft over unpaid taxes. According to the radio station, the Danish tax authorities want Microsoft to pay $1bn in backdated taxes from the transaction.

DR reports that Microsoft sold the rights to Navision's business planning software under market value to a subsidiary in Ireland, which now operates as Dynamics NAV. The radio station further reports that the Danish tax authorities are claiming $1bn in back taxes and interest from sales made by Dynamics NAV.

If DR's reports are correct, Microsoft isn't the first company to make use of Ireland's low corporate tax rates, with Google and Intel taking advantage of the country's low 12.5 percent corporate tax rate. In comparison, Denmark's corporation tax rate is 25 percent, though there is talk of lowering it to 22 percent.

Last year Amazon, Google and Starbucks were publicly named and shamed for their tax avoidance procedures, which though not illegal are deeply unpopular with a public that is feeling the pinch while big firms are alleged to have avoided billions in tax by funneling revenues through tax havens in Europe and the Caribbean. Starbucks in particular raised the public's ire by telling the UK government how much more tax it would willingly pay when it said it would pay £10m.

Microsoft declined to comment on this story. µ