Summary
- The IRS claims that Microsoft owes approximately $28.9 billion in taxes, penalties, and fines.
- Microsoft has a history of dealing with regulatory bodies, including fines for illegally collecting children's data and failing to promote other browsers.
- Despite regulatory hurdles, Microsoft aims to close the Activision deal by October 13, but if it falls through, it will face a $4.5 billion breakup fee.
The IRS has claimed that Microsoft owes it around $28.9 billion in taxes, which also includes other penalties and fines. This comes at a time when Microsoft is on the verge of finalizing its $68.7 billion Activision deal.
This isn’t Microsoft’s first rodeo as it has frequently found itself dealing with various regulatory bodies across the globe.In June 2023, Microsoft was handed a $20 million fine in by the US FTC for illegally collecting children’s personal data via Xbox. Back in 2013, the European Commission also slapped the tech giant with a $731 million fine for failing to promote other browsers in Windows 7. Now, the IRS has issued a notice to Microsoft to cough up a hefty amount in taxes which could spell trouble for the company.
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In an official blog post on Microsoft’s website, the company gave a brief look into what exactly is the dispute about and what it plans to do about it. The issue is pertaining Microsoft’s income and expense allocations between 2004 and 2013, which has been flagged by the IRS. Microsoft also mentioned that it has been working with the regulator to address these concerns, but the IRS had different views and explanations regarding the same. Consequently, the IRS sent Microsoft a series of Notices of Proposed Adjustment, which claimed that Microsoft owed an additional $28.9 billion in taxes and fines for the 2004-2013 period. However, Microsoft has refused to accept this notice and will appeal the decision, which could take years to be resolved fully. Microsoft also pointed out that it has always acted lawfully, and has paid over $67 billion in taxes to the US since the company’s inception.
Considering the magnitude of the Activision Blizzard acquisition, it caught the attention of all the major regulatory authorities across the globe, where investigations conducted by the European Commission, UK’s CMA, and the US FTC were the most notable. While it received the go ahead from the EU, the CMA initially moved to block Microsoft’s attempt to acquire Activision, whereas the FTC served it with a legal notice which sparked a lengthy court battle.
Despite this hurdle, reports have suggested that Microsoft will aim to close the Activision deal by October 13, 2023. However, if the deal falls through before the October 18 deadline, Microsoft will have to pay a hefty $4.5 billion breakup fee.
Source: Microsoft