According to an article published in The Guardian on 3rd June 2021, Microsoft’s Irish subsidiary made a profit of $315bn last year but paid no corporation tax as it is a “resident” for tax purposes in Bermuda. The subsidiary called Microsoft Round Island One states in its accounts that it has “no employees other than directors”. Its profits are close to three-quarters of Ireland’s entire Gross Domestic Product (GDP). This revelation comes as finance ministers meet today for the G7 to discuss COVID-19 economic uncertainties and climate.
“Race to the bottom”
Siobhan McGee, Country Director of ActionAid Ireland, says: “Microsoft’s tax behaviour shows the urgent need to fix our broken global tax system. Companies like Microsoft can only continue these practices as long as tax laws in countries like Ireland allow them.
“Ireland’s low corporate tax rate creates a race to the bottom for countries competing for foreign direct investment but is a win-win for big tech companies like Microsoft.
“Taxing Microsoft’s profits more fairly in Ireland could mean billions in extra tax revenue to invest in vital public services. Even with Ireland’s exceptionally low 12.5% corporate tax rate, it would mean nearly $40billion in extra revenue to spend on health, tackling homelessness and funding the recovery from the pandemic.
“Proposals on taxing the digital economy put forward by the OECD and up for discussion by finance ministers ahead of the G7 summit, don’t go anywhere near far enough in making the fundamental changes to the global tax system needed to make it fair and transparent.
“The G7 summit must be a starting point for the international community to come together to negotiate rules that will actually address the tax avoidance, secrecy and unfair distribution of taxing rights that continues to plague international corporate taxation.”