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Microsoft New Zealand audited over tax diversion questions

Microsoft New Zealand is being audited by the IRD (Inland Revenue Department). The audit is happening over the Microsoft branch’s use of “transfer pricing” – a practice that can be used by multinational companies in order to minimize tax costs.

“We believe tax is an issue that should be addressed at the global level, but having said that, we abide by the laws in all jurisdictions in which we operate.” Microsoft Spokesperson┬áBrendan Boughen

It’s unclear how long the audit will take, or what – if any – repercussions it might have. As it stands now, it seems like things will be staying relatively quiet for the foreseeable future. Apart from the initial statements from Boughen, Microsoft New Zealand hasn’t commented on the audit or the circumstances around it.

While transfer pricing isn’t necessarily against the law, it can potentially be abused in ways that cross the line. As the audit takes place, the IRD will be trying to determine if any transfer pricing on the part of Microsoft would be over the line.

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Do you think this audit matters, or is it just business as usual?