According to Microsoft’s formal filing on Wednesday, the US Internal Revenue Service is demanding that it pay a staggering $29 billion in unpaid taxes from 2004 to 2013.
The case draws attention to the significant multinational corporations’ international tax practices. These corporations have been accused in recent years of moving money to countries with lower taxes in an effort to avoid paying greater taxes in their key markets.
“We disagree with the proposed adjustments and will vigorously contest the (demand) through the IRS’s administrative appeals office and, if necessary, judicial proceedings,” the company said in its filing to the US markets authority.
In a blog post, Microsoft said the issue with the IRS was with its transferring of revenue across international jurisdictions during the period.
The practice, called cost-sharing, is used by “many large multinationals…because it reflects the global nature of their business,” the company said.
“We strongly believe we have acted in accordance with IRS rules and regulations and that our position is supported by case law,” the blog post added.
When contacted by AFP, the IRS stated that it was against US law for it to affirm or deny a tax case that was still pending.
Microsoft stated that the IRS appeals process would take years, and that if that failed, the business would challenge the claim in court.
The Windows maker said the demand emerged out of a decade-long discussion with the IRS “about how we allocated our income and expenses for tax years beginning as far back as 2004.”
“We have changed our corporate structure and practices since the years covered by the audit, and as a result, the issues raised by the IRS are relevant to the past but not to our current practices,” it said.
Microsoft added that “since 2004, we have paid over $67 billion in taxes to the US.”
Authorities have long had issues with the main US IT corporations’ accounting methods.
Companies like Apple, Amazon, and Microsoft have been accused by governments of moving money through low- or no-tax jurisdictions in order to avoid paying taxes in their primary markets and increase profits.
This led the Organization for Economic Cooperation and Development (OECD) to mediate a significant international agreement including 140 nations in order to better distribute and manage the tax revenue of the giants.
In order to have it ratified by the end of the year, the OECD produced a draft agreement on Wednesday that implements a significant portion of that agreement.
Authorities in the EU ordered Apple to pay $14 billion in back taxes in 2016 due to similar accounting techniques, but Brussels lost Apple’s appeal and is now awaiting the result of a subsequent appeal.
