A bad week for Microsoft just got worse. After taking a $6.2 billion hit on aQuantive and facing claims about Steve Ballmer’s “foolish” leadership in Vanity Fair, the company is now in the dock over its tax affairs in France.
Local reports suggest the French authorities are investigating the software giant over claims that it has committed fraud, by secretly routing money through offshore companies to avoid corporate tax — a move which could violate the country’s laws.
French magazine Le Canard Enchaîné made the claims after Microsoft’s French headquarters were subjected to a tax raid last week.
The magazine claims that the authorities are examining whether for the past four years Microsoft has operated “a business aimed at French customers, for the French market, using the human and material resources of Microsoft France and located in France… without paying corresponding taxes.”
Corporate tax in France is currently 33 percent, but many companies — such as Amazon and Google use complicated European tax avoidance schemes to route money earned around the continent to more pleasing tax regimes, such as Ireland (where corporation tax is 12.5 percent.)
Avoidance — using loopholes in the law to minimize taxes — is legal if done properly. Evasion — the mis-statement of accounts in order to reduce tax burdens — is not. The French government have spent the last few years trying to crack down on tax cheats and championing the end of tax havens.
It’s already been a tough time for Microsoft France, which is looking to make its first ever round of redundancies after admitting that it could not overthrow Google’s dominance in online advertising.
A local spokesman for the company did not respond to a request for comment.