Microsoft Australia Uses Offshore Sales Offices To Reduce Tax Bill

by Mary Swire, Tax-News.com, Hong Kong

04 April 2003

Microsoft has revealed that it books much of its Australian sales revenue through offshore offices in the region as a tax-saving measure.

The revelation has come to light as the Australian Tax Office (ATO) steps up its investigations into multinational technology companies employing tax minimisation schemes.

However, under current Australian taxation laws, it is perfectly legal for multinational companies to book some of their Australian sales through offices in Singapore, Malaysia or Hong Kong to lessen their tax bill, and many corporations, including Microsoft, employ this method.

Technology companies have been singled out by the ATO as it continues to investigate firms' involvement in transfer pricing techniques to minimise tax, especially those employing intellectual property licensing schemes.

According to reports, six to eight multinational technology firms are being audited by the Tax Office for alleged abuse of transfer pricing techniques. Microsoft's activities should remain outside of the ATO's scrutiny however, as simply booking sales offshore does not amount to a transfer pricing scheme. Nevertheless, an ATO spokeswoman claimed that routing sales through offshore offices could be used as a method of avoiding sales tax and the Tax Office is currently consulting with the industry on the issue.

Microsoft's Australian revenue grew by 565% between 1989 and 2002 from around $40 million (according to reports) to $226 million. This compares with global growth of 3,526% in the same period, suggesting that the Australian market still has some potential for growth.

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