Microsoft Korea fined for tax evasion

[TS | Thomas]

Microsoft Korea paid back taxes & penalties for tax evasion to the tune of US$27 million & is disputing a further US$32 million payment to the South Korean National Tax Service. In March, Microsoft Korea admitted that it had evaded taxes in Korea between 1997 & 2001. The Korean subsidiary was charged with inflating expenses by overstating the cost of software imported from its U.S. parent company, thus underreporting its income.

Would you like to know more?

 

[poertner_1274]

Why would a company so large have to worry about taxes? I understand it takes away from their gross margin, but when you are making that much money I don't think a few taxes are going to be that much of a hit on your margin.

 

[Krugger]

it wasn't that they DIDN'T pay taxes, it's more of an issue of improper accounting methods, sort of similar to a lot of the US companies that have been in the new recently. Accounting allows for a lot of leeway as far as how to record and when to record different items. Here though, they overstated the cost of the software they were bringing in from the US, thereby overestimating their expenses, and underestimating their income. This meant they paid less tax then they otherwise should have.

 

[poertner_1274]

I understand that, but why would they falsly claim the cost of the software in the first place? Wouldn't they know what was going on?

 

[Krugger]

"saying that the allegation arose from a difference of opinion between the company and the tax authorities over the way imported software products are priced."
interesting. well i'm not sure. I'm sure they say it was accidental, and they didn't do it on purpose... but yea, i guess they might've just gotten greedy. also, it may have only been a few top people that decided to do it, without others knowledge. Microsoft? Greedy? never

 

[poertner_1274]

Too true my friend, too true.

 

[Didou]

Well with a big counterfeit supplier not too far away *cough*China*cough*, I think Microsoft Asia doesn't have the same sales numbers their counterparts in America & Europe have.

Maybe it was a technique to make shareholders feel more "secure".

 

[BrownPaper]

a lot of companies are finally gettin caught nowadays. i suppose they are not as slick as they used to be (or at least as slick as they thought they were).