Software King of the World, Microsoft, is apparently shifting profits to low-tax countries and away from places where it has more staff and chunky sales.
In 2005, the shy and retiring Microsoft chief executive Steve Ballmer said a low corporate tax rate “is part of the overall advantage of doing business in Ireland. It would be disingenuous to say otherwise.”
In 2026, the EU requires country-by-country compliance reports, and the New York Times notes that Microsoft was probably the first major US tech company to publish one.
The report was produced to comply with the new rules, which have made Big Tech’s tax plumbing rather harder to hide. Like other large companies, Microsoft uses cross-subsidiary transactions to shift profits and reduce its tax bill.
The report showed a familiar pattern, with high returns in low-tax jurisdictions and skinny margins in higher-tax ones. The numbers produced some fairly daft results.
Microsoft said it generated almost 40 per cent of its pretax income in tax-friendly Ireland, where it employed about three per cent of its global workforce.
In higher-tax Germany, Europe’s largest economy, Microsoft earned barely half of one per cent of its global profits. Excluding Ireland, the company said it generated less than two per cent of its worldwide pretax earnings in Europe.
In Luxembourg, Microsoft said it had $283 million in pretax income with only 34 employees, which is some productivity miracle.
America’s Internal Revenue Service is challenging profit-shifting transactions used by Vole and is seeking nearly $29 billion in back taxes.
The company said it disagrees with the IRS and, in a securities filing, that it “will vigorously contest” the proposed tax bills.
This week, a Volish blog post offered its own “context”, arguing that tax is “one important measure of contribution, but it is not the only one.”
“Our investments, partnerships, infrastructure, and long-term presence in countries around the world also reflect a commitment to helping strengthen the economies and communities where we operate, today and for the future.”
That does not explain why so much profit keeps washing up in places with fewer people and softer tax bills.
