13 ms·

Microsoft owes Denmark $1B in taxes

135 points by runesoerensen 14y ago

runesoerensen 14y ago
Google translation: http://translate.google.com/translate?hl=en&sl=da&tl=en&u=http%3A%2F%2Fwww.dr.dk%2FNyheder%2FPenge%2F2013%2F03%2F03%2F03201749.htm http://translate.google.com/translate?hl=en&sl=da&tl...
- ars 14y ago
  Could someone do a human translation? This is enough to get the general idea, but not the details.
  - mborch 14y ago
    There isn't much more to it. As said in another comment, it's a "classical transfer pricing case". Google Translate doesn't do a very good job though: > Neither Honey, Microsoft or the IRS IRS wants to comment on the pending tax to DR2. "Honey" here would be the Danish tax authority, SKAT, which means tax, but also treasure, and is often used similarly to the English "honey".
  - runesoerensen 14y ago
    TNW article in english: http://thenextweb.com/microsoft/2013/03/04/blurred-navision-microsoft-may-owe-denmark-more-than-1-billion-in-monster-tax-case/ http://thenextweb.com/microsoft/2013/03/04/blurred-navision-...
  - pessimism 14y ago
    Done: http://news.ycombinator.com/item?id=5317835 http://news.ycombinator.com/item?id=5317835. :)
- flexie 14y ago
  Notice that in the Google translate version 10.8 billion kroner is translated to 10.8 billion dollars. Google Translate often does that :-)
  - thejosh 14y ago
    Because it is the exact translation. It would be nice if they converted it into your currency or just leave it as the original currency.
    - flexie 14y ago
      No, kroner doesn't translate to dollars anymore than inches translates to centimeters.
    - kome 14y ago
      > Because it is the exact translation. No, it's not.
    - unwind 14y ago
      There's nothing exact about it, it's just wrong and very very confusing. A currency is a unit, a scale-factor. It can only be translated if you also translate, i.e. re-compute, the corresponding measure (the number itself). I would classify this a major bug, the reasonable thing if they don't want to fix it (since fixing it requires reaching out to a time-dependent currency conversion table, it might be a non-desirable thing to do) they should just not translate that part at all. Then it becomes up to the reader to go back and look up the currency in question, instead of just thinking it's already been done.
    - jonascopenhagen 14y ago
      The exact translation of kroner would be kroner - not dollars. http://www.merriam-webster.com/dictionary/kroner http://www.merriam-webster.com/dictionary/kroner
  - okamiueru 14y ago
    Not to mention that a Danish "billion" is not the same as a US "billion". A Danish, Norwegian, Swedish ("biljon" ) billion is 10^12, a US billion is 10^9. It's utterly confusing sometimes, and this is one of the fewer cases where US metric makes much more sense. US: million, billion, trillion. 10^6, 10^9, 10^12 Skandinavia: million, milliard, billion, billiard, trillion, trilliard 10^6, 10^9, 10^12, etc PS: I don't know about the rest of the world.
anigbrowl 14y ago
As an Irish person I find the widespread use of the Irish tax code for the purpose of tax avoidance by multinationals deeply embarrassing. This has made the country something of a pariah among EU tax authorities without conferring any discernible benefit to the Irish economy. http://en.wikipedia.org/wiki/Double_Irish_arrangement http://en.wikipedia.org/wiki/Double_Irish_arrangement
- lazyjones 14y ago
  > without conferring any discernible benefit to the Irish economy. Mildly put ... Some people might say it contributed to the problems the Irish economy has at the moment and also to those of the rest of the EU, which has to compete with the low taxation and loopholes the Irish tax code offers.
  - eru 14y ago
    At least they are sticking to the rules, even with loopholes and a low tax rate, in Ireland. Greece has much bigger problems.
    - lazyjones 14y ago
      Greece has both loopholes (for ship owners / shipping companies, think Onassis) and corrupt tax collectors, but their biggest [OT] problem is the corrupt government that managed to greatly increase the interest on the country's dept so the banks could earn more - on purpose, I'm sure (good reading: famous composer and author Theodorakis about this => http://theodorakisfriends.com/news/the-truth-about-greece/ http://theodorakisfriends.com/news/the-truth-about-greece/).
      - gadders 14y ago
        Plus all the ridiculous feather-bedding of benefits to government and other employees that were clearly unaffordable.
- Samuel_Michon 14y ago
flexie 14y ago
tl;dr Danish: Microsoft bought the Danish Navision Software (that made accounting software, now called Dynamics NAV) for roughly 10.8 billion kroner in 2002. Shortly thereafter, Microsoft sold the rights to the software to Microsoft's Irish subsidiary at a price which the Danish tax authorities think is too low. The Danish tax authorities now claims taxes amounting to 5.8 billion kroner from Microsoft based on the price they think would have been right. It's a classical transfer pricing case.
- bfwi 14y ago
  The article also states that the irish subsidiary is owned by companies in Bermuda and British virgin islands, which is where the profits go. Is it easy for Microsoft to get this money back into the US? And how?
  - drucken 14y ago
    If you mean the cash, why would they need to get these funds back? Earnings are posted from the group. Credit lines and capital market borrowing similarly have limited ties to jurisdiction. Regulatory filings can be arranged to not post detailed transfer pricing information. If they ever want to pay a dividend, the cash they have on hand for on-going concerns should more than cover it. Where it does not, they can have it "loaned" from the foreign subsidiaries and gain even more tax efficiencies... Otherwise, much of the time, they can just leave it in control of Bermudan and Irish accounts; at least, until debt-ridden, revenue-starved, middle-class squeezed Western governments start moaning a little too loudly and the tax accountants and lawyers prepare to roll out the next tax avoidance schemes down the closest tax haven rabbit holes!
    - lifeisstillgood 14y ago
      This is one that bothers me - UK government is chairing the G20 and is pushing "fixing international corporate taxation" It's popular amoungst all the member nations, but there seems to be absolutely no clue what to actually do If anyone has a suggestion there are a lot of people waiting to listen ?
deleted 14y ago
[deleted]
amirmc 14y ago
Anyone interested in learning more about how tax avoidance and havens work as well as large company 'best-practices' might be interested in reading Treasure Islands by Nicholas Shaxson. Book site: http://treasureislands.org http://treasureislands.org Amazon: http://www.amazon.co.uk/Treasure-Islands-Havens-Stole-World/dp/0099541726/ref=sr_1_1?s=books&ie=UTF8&qid=1362393762&sr=1-1 http://www.amazon.co.uk/Treasure-Islands-Havens-Stole-World/... Disclaimer: There's a referral code in the Amazon link for my college's library
- kmfrk 14y ago
  Would you happen to know what the difference is between the UK and US version? I assume it's not how they spell "color".
  - amirmc 14y ago
    I think it's only language (color vs colour) and the book cover. I can imagine the UK version of the book cover would not have gone down well with the US audience (and vice versa). The content is likely identical otherwise.
- a3camero 14y ago
  For anyone who'd like to read more about transfer pricing, here are the OECD guidelines that tax lawyers/accoutants use: http://people.f3.htw-berlin.de/Professoren/vonWuntsch/download/weitere/OECD_Transfer_Pricing_Guidelines_2010.pdf http://people.f3.htw-berlin.de/Professoren/vonWuntsch/downlo.... You'll see these cited in every international transfer pricing case.
Nux 14y ago
They should also look at Shitbucks, amazon and so on. The UK is pretty pissed at them, too. I hope there's going to be some law to make them pay tax in the same country where they get the revenue.
deleted 14y ago
[deleted]
pessimism 14y ago
I decided to translate the entire article to English from Danish, since this is too important to have people learn about it through friggin’ Google Translate: https://gist.github.com/ndarville/5081765 https://gist.github.com/ndarville/5081765. The only thing that really tripped me up was the corporate terminology between affiliates, companies, corporations, subsidiaries, parent companies, shell companies, etc., but I found the wording in the article to use the terms interchangeably as well. I haven’t proofed it yet, so consider it a rough draft. Feel free to post comments in the Gist about anything that comes to mind.
- uvdiv 14y ago
  Why did they wait until 2013 to tax something that happened in 2002? That reflects poorly on Denmark.
  - hmottestad 14y ago
    It takes time to uncover that Microsoft had done something tax worthy without telling anyone. Microsoft bought a danish company, then sold a huge asset from that company to another Microsoft owned company in Ireland (probably for tax reasons) then told the danish tax department that the asset was worth less than it should have been, thus avoiding large taxes. This all takes a while to uncover, then it has to be double checked. Then you have to talk to Microsoft about it....and then you can tell the press about it.
- belorn 14y ago
  > I decided to translate the entire article to Danish You meant, to English from Danish. Thanks for translation.
  - pessimism 14y ago
    That’s what I get for not proofing my comment. Cheers.
- pessimism 14y ago
  Just to go full inception, this is my coverage of their coverage of our coverage of their coverage: http://www.dr.dk/Nyheder/Penge/2013/03/04/141416.htm http://www.dr.dk/Nyheder/Penge/2013/03/04/141416.htm Main take-away: * #2 on /r/technology * 79% of hits are currently international
aoetr 14y ago
Taxation is theft. Especially given that surely Microsoft hasn't consumed anything even remotely close to 1 billion in Danish goverment services. Hopefully Microsoft will be able to resist this armed robbery attempt. Otherwise, they could simply use half that amount, $500 million, to purchase missiles and drone planes to defend themselves and counterattack (they can buy 500-1000 tomahawk cruise missiles or 10-20 MQ-9 Reaper drones with that amount).
- pc86 14y ago
  That'll teach me to upvote after reading two sentences...
- frogpelt 14y ago
  Taxation is to be expected. How much or how little can be debated. The part I am missing is how, if MS bought an entire company for $1.8B+ and then sold a software title from that company to a subsidiary, that they should owe $1B+ in taxes. I would assume the company Navision had many more assets than just the rights to this software: property, cash, etc. At best, it sounds like major overreach by the Danish government. At worst, as you say, it is attempted armed robbery just because it is MS and they have money.
- mpyne 14y ago
  > Taxation is theft. I sincerely hope you've never driven on a paved road or been able to drink clean water. For that matter I'm sure that the public had absolutely nothing to do with your successfully being delivered, educated, and able to complain on the former APRANET/NSFNET about how taxes are by definition theft.
  - ahallock 14y ago
    You're forced to use the roads. There is no practical way around government services since they're so pervasive. Just because someone benefited from a government service does not make it morally justifiable to steal.
    - 14y ago
lawnchair_larry 14y ago
I think they owe WA a few billion too. www.microsofttaxdodge.com

135 points by runesoerensen 14y ago

Google translation: http://translate.google.com/translate?hl=en&sl=da&tl=en&u=http%3A%2F%2Fwww.dr.dk%2FNyheder%2FPenge%2F2013%2F03%2F03%2F03201749.htm http://translate.google.com/translate?hl=en&sl=da&tl...

ars 14y ago
Could someone do a human translation? This is enough to get the general idea, but not the details.
- mborch 14y ago
  There isn't much more to it. As said in another comment, it's a "classical transfer pricing case". Google Translate doesn't do a very good job though: > Neither Honey, Microsoft or the IRS IRS wants to comment on the pending tax to DR2. "Honey" here would be the Danish tax authority, SKAT, which means tax, but also treasure, and is often used similarly to the English "honey".
- runesoerensen 14y ago
  TNW article in english: http://thenextweb.com/microsoft/2013/03/04/blurred-navision-microsoft-may-owe-denmark-more-than-1-billion-in-monster-tax-case/ http://thenextweb.com/microsoft/2013/03/04/blurred-navision-...
- pessimism 14y ago
  Done: http://news.ycombinator.com/item?id=5317835 http://news.ycombinator.com/item?id=5317835. :)
flexie 14y ago
Notice that in the Google translate version 10.8 billion kroner is translated to 10.8 billion dollars. Google Translate often does that :-)
- thejosh 14y ago
  Because it is the exact translation. It would be nice if they converted it into your currency or just leave it as the original currency.
  - flexie 14y ago
    No, kroner doesn't translate to dollars anymore than inches translates to centimeters.
  - kome 14y ago
    > Because it is the exact translation. No, it's not.
  - unwind 14y ago
    There's nothing exact about it, it's just wrong and very very confusing. A currency is a unit, a scale-factor. It can only be translated if you also translate, i.e. re-compute, the corresponding measure (the number itself). I would classify this a major bug, the reasonable thing if they don't want to fix it (since fixing it requires reaching out to a time-dependent currency conversion table, it might be a non-desirable thing to do) they should just not translate that part at all. Then it becomes up to the reader to go back and look up the currency in question, instead of just thinking it's already been done.
  - jonascopenhagen 14y ago
    The exact translation of kroner would be kroner - not dollars. http://www.merriam-webster.com/dictionary/kroner http://www.merriam-webster.com/dictionary/kroner
- okamiueru 14y ago
  Not to mention that a Danish "billion" is not the same as a US "billion". A Danish, Norwegian, Swedish ("biljon" ) billion is 10^12, a US billion is 10^9. It's utterly confusing sometimes, and this is one of the fewer cases where US metric makes much more sense. US: million, billion, trillion. 10^6, 10^9, 10^12 Skandinavia: million, milliard, billion, billiard, trillion, trilliard 10^6, 10^9, 10^12, etc PS: I don't know about the rest of the world.

anigbrowl 14y ago

As an Irish person I find the widespread use of the Irish tax code for the purpose of tax avoidance by multinationals deeply embarrassing. This has made the country something of a pariah among EU tax authorities without conferring any discernible benefit to the Irish economy. http://en.wikipedia.org/wiki/Double_Irish_arrangement http://en.wikipedia.org/wiki/Double_Irish_arrangement

lazyjones 14y ago
> without conferring any discernible benefit to the Irish economy. Mildly put ... Some people might say it contributed to the problems the Irish economy has at the moment and also to those of the rest of the EU, which has to compete with the low taxation and loopholes the Irish tax code offers.
- eru 14y ago
  At least they are sticking to the rules, even with loopholes and a low tax rate, in Ireland. Greece has much bigger problems.
  - lazyjones 14y ago
    Greece has both loopholes (for ship owners / shipping companies, think Onassis) and corrupt tax collectors, but their biggest [OT] problem is the corrupt government that managed to greatly increase the interest on the country's dept so the banks could earn more - on purpose, I'm sure (good reading: famous composer and author Theodorakis about this => http://theodorakisfriends.com/news/the-truth-about-greece/ http://theodorakisfriends.com/news/the-truth-about-greece/).
    - gadders 14y ago
      Plus all the ridiculous feather-bedding of benefits to government and other employees that were clearly unaffordable.
Samuel_Michon 14y ago

flexie 14y ago

tl;dr Danish: Microsoft bought the Danish Navision Software (that made accounting software, now called Dynamics NAV) for roughly 10.8 billion kroner in 2002. Shortly thereafter, Microsoft sold the rights to the software to Microsoft's Irish subsidiary at a price which the Danish tax authorities think is too low. The Danish tax authorities now claims taxes amounting to 5.8 billion kroner from Microsoft based on the price they think would have been right. It's a classical transfer pricing case.

bfwi 14y ago
The article also states that the irish subsidiary is owned by companies in Bermuda and British virgin islands, which is where the profits go. Is it easy for Microsoft to get this money back into the US? And how?
- drucken 14y ago
  If you mean the cash, why would they need to get these funds back? Earnings are posted from the group. Credit lines and capital market borrowing similarly have limited ties to jurisdiction. Regulatory filings can be arranged to not post detailed transfer pricing information. If they ever want to pay a dividend, the cash they have on hand for on-going concerns should more than cover it. Where it does not, they can have it "loaned" from the foreign subsidiaries and gain even more tax efficiencies... Otherwise, much of the time, they can just leave it in control of Bermudan and Irish accounts; at least, until debt-ridden, revenue-starved, middle-class squeezed Western governments start moaning a little too loudly and the tax accountants and lawyers prepare to roll out the next tax avoidance schemes down the closest tax haven rabbit holes!
  - lifeisstillgood 14y ago
    This is one that bothers me - UK government is chairing the G20 and is pushing "fixing international corporate taxation" It's popular amoungst all the member nations, but there seems to be absolutely no clue what to actually do If anyone has a suggestion there are a lot of people waiting to listen ?

deleted 14y ago

[deleted]

amirmc 14y ago

Anyone interested in learning more about how tax avoidance and havens work as well as large company 'best-practices' might be interested in reading Treasure Islands by Nicholas Shaxson. Book site: http://treasureislands.org http://treasureislands.org Amazon: http://www.amazon.co.uk/Treasure-Islands-Havens-Stole-World/dp/0099541726/ref=sr_1_1?s=books&ie=UTF8&qid=1362393762&sr=1-1 http://www.amazon.co.uk/Treasure-Islands-Havens-Stole-World/... Disclaimer: There's a referral code in the Amazon link for my college's library

kmfrk 14y ago
Would you happen to know what the difference is between the UK and US version? I assume it's not how they spell "color".
- amirmc 14y ago
  I think it's only language (color vs colour) and the book cover. I can imagine the UK version of the book cover would not have gone down well with the US audience (and vice versa). The content is likely identical otherwise.
a3camero 14y ago
For anyone who'd like to read more about transfer pricing, here are the OECD guidelines that tax lawyers/accoutants use: http://people.f3.htw-berlin.de/Professoren/vonWuntsch/download/weitere/OECD_Transfer_Pricing_Guidelines_2010.pdf http://people.f3.htw-berlin.de/Professoren/vonWuntsch/downlo.... You'll see these cited in every international transfer pricing case.

Nux 14y ago

They should also look at Shitbucks, amazon and so on. The UK is pretty pissed at them, too. I hope there's going to be some law to make them pay tax in the same country where they get the revenue.

deleted 14y ago

[deleted]

pessimism 14y ago

I decided to translate the entire article to English from Danish, since this is too important to have people learn about it through friggin’ Google Translate: https://gist.github.com/ndarville/5081765 https://gist.github.com/ndarville/5081765. The only thing that really tripped me up was the corporate terminology between affiliates, companies, corporations, subsidiaries, parent companies, shell companies, etc., but I found the wording in the article to use the terms interchangeably as well. I haven’t proofed it yet, so consider it a rough draft. Feel free to post comments in the Gist about anything that comes to mind.

uvdiv 14y ago
Why did they wait until 2013 to tax something that happened in 2002? That reflects poorly on Denmark.
- hmottestad 14y ago
  It takes time to uncover that Microsoft had done something tax worthy without telling anyone. Microsoft bought a danish company, then sold a huge asset from that company to another Microsoft owned company in Ireland (probably for tax reasons) then told the danish tax department that the asset was worth less than it should have been, thus avoiding large taxes. This all takes a while to uncover, then it has to be double checked. Then you have to talk to Microsoft about it....and then you can tell the press about it.
belorn 14y ago
> I decided to translate the entire article to Danish You meant, to English from Danish. Thanks for translation.
- pessimism 14y ago
  That’s what I get for not proofing my comment. Cheers.
pessimism 14y ago
Just to go full inception, this is my coverage of their coverage of our coverage of their coverage: http://www.dr.dk/Nyheder/Penge/2013/03/04/141416.htm http://www.dr.dk/Nyheder/Penge/2013/03/04/141416.htm Main take-away: * #2 on /r/technology * 79% of hits are currently international

aoetr 14y ago

Taxation is theft. Especially given that surely Microsoft hasn't consumed anything even remotely close to 1 billion in Danish goverment services. Hopefully Microsoft will be able to resist this armed robbery attempt. Otherwise, they could simply use half that amount, $500 million, to purchase missiles and drone planes to defend themselves and counterattack (they can buy 500-1000 tomahawk cruise missiles or 10-20 MQ-9 Reaper drones with that amount).

pc86 14y ago
That'll teach me to upvote after reading two sentences...
frogpelt 14y ago
Taxation is to be expected. How much or how little can be debated. The part I am missing is how, if MS bought an entire company for $1.8B+ and then sold a software title from that company to a subsidiary, that they should owe $1B+ in taxes. I would assume the company Navision had many more assets than just the rights to this software: property, cash, etc. At best, it sounds like major overreach by the Danish government. At worst, as you say, it is attempted armed robbery just because it is MS and they have money.
mpyne 14y ago
> Taxation is theft. I sincerely hope you've never driven on a paved road or been able to drink clean water. For that matter I'm sure that the public had absolutely nothing to do with your successfully being delivered, educated, and able to complain on the former APRANET/NSFNET about how taxes are by definition theft.
- ahallock 14y ago
  You're forced to use the roads. There is no practical way around government services since they're so pervasive. Just because someone benefited from a government service does not make it morally justifiable to steal.
  - 14y ago

lawnchair_larry 14y ago

I think they owe WA a few billion too. www.microsofttaxdodge.com