Microsoft France Denies Tax Fraud

Microsoft Corporation (NASDAQ:MSFT)’s French unit today denied the claims of the local tax authorities that it is not complying with local tax laws. Microsoft said in an e-mailed statement that the case, “will end once again with the conclusion that Microsoft fully complies with French tax laws.”

French tax authorities visited headquarters of Microsoft France to conduct an inspection this Wednesday and also last Thursday for a routine check.

The Company states in regards to the latest inspections, “we confirm that on June 28 an inspection by tax authorities took place at the headquarters of Microsoft France in Issy-les-Moulineaux. This was part of a routine check and, as for any administrative or tax procedure, we remain at the disposal of the authorities.”

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A report published Wednesday by French investigative newspaper Le Canard Enchainé states that the audit involved 67 tax inspectors from a number of agencies including the National Directorate of Tax Investigations, responsible for detecting tax evasion, and the Brigade for the Verification of Computerized Accounts. The regulator agency officials who were inspecting from dawn to well into the night, were accompanied by 30 police officers.

The investigations started over a year ago, when tax inspectors auditing a French gaming company found invoices from Irish and U.S. subsidiaries of Microsoft for advertising and commercial services allegedly performed in France by employees of French subsidiaries.

Additionally, Google France received a surprise visit from tax inspectors over a year ago for billing services performed by its French subsidiary through its Irish subsidiary. According to reports, Google France could face a value-added tax bill of up to €100 million (US$125 million).

This routing of invoices allow the service providers to lower their tax burden by avoiding French Corporate tax of 33.33 percent and paying Irish Corporate tax of just 12.5 percent. It seems ‘like a a no good horrible week’ for Microsoft; along with tax fraud claims, the software giant took a $6.2 billion hit on aQuantive. Affitionally, the latest issue of Vanity Fair takes a swipe at the CEO, and claims Steve Ballmer is “foolish” leader.