Did Microsoft Shift Its Profits to Low-Tax Countries?

Microsoft is apparently shifting its profits to countries with low taxes — and out of countries where they have many more employees and significant sales. Back in 2005 Former Microsoft CEO Steve Ballmer even said that a low corporate tax rate "is part of the overall advantage of doing business in Ireland," remembers long-time Slashdot reader theodp. (Ballmer added "It would be disingenuous to say otherwise.")


But in 2026 the EU now requires a country-by-country compliance report, and the New York Times notes that Microsoft "was most likely the first major U.S. technology company to make a so-called country by country report of its finances to comply..."

Like other big companies, Microsoft uses transactions between subsidiaries to shift profits around to reduce its tax bill. The report revealed a consistent pattern: high returns in low-tax jurisdictions and slim margins in higher-tax ones. The report showed the sometimes absurd results. Microsoft said it had generated almost 40 percent of its pretax income in tax-friendly Ireland, where it employed about 3 percent of its global work force. In higher-tax Germany, the largest economy in Europe, Microsoft earned barely half of 1 percent of its global profits, it said.

Excluding Ireland, the company said, it generated less than 2 percent of its worldwide pretax earnings in Europe... [In Luxembourg Microsoft said it had $283 million in pretax income with only 34 employees.]


[America's] Internal Revenue Service is challenging profit-shifting transactions used by Microsoft, and is seeking back taxes of nearly $29 billion4. The company has said it disagrees with the I.R.S. and said in a securities filing that it "will vigorously contest" the proposed tax bills.



This week a Microsoft blog post offered their own "context," arguing that tax is "one important measure of contribution, but it is not the only one.

"Our investments, partnerships, infrastructure, and long-term presence in countries around the world also reflect a commitment to helping strengthen the economies and communities where we operate, today and for the future."

Read more of this story at Slashdot.