Microsoft owes Denmark $1B in taxes | Hacker News Reader

Microsoft owes Denmark $1B in taxes

dr.dk

135 pointsrunesoerensen129 comments

tl;dr Danish:

Microsoft bought the Danish Navision Software (that made accounting software, now called Dynamics NAV) for roughly 10.8 billion kroner in 2002. Shortly thereafter, Microsoft sold the rights to the software to Microsoft's Irish subsidiary at a price which the Danish tax authorities think is too low. The Danish tax authorities now claims taxes amounting to 5.8 billion kroner from Microsoft based on the price they think would have been right.

It's a classical transfer pricing case.

The article also states that the irish subsidiary is owned by companies in Bermuda and British virgin islands, which is where the profits go.

Is it easy for Microsoft to get this money back into the US? And how?

If you mean the cash, why would they need to get these funds back?

Earnings are posted from the group. Credit lines and capital market borrowing similarly have limited ties to jurisdiction. Regulatory filings can be arranged to not post detailed transfer pricing information.

If they ever want to pay a dividend, the cash they have on hand for on-going concerns should more than cover it. Where it does not, they can have it "loaned" from the foreign subsidiaries and gain even more tax efficiencies...

Otherwise, much of the time, they can just leave it in control of Bermudan and Irish accounts; at least, until debt-ridden, revenue-starved, middle-class squeezed Western governments start moaning a little too loudly and the tax accountants and lawyers prepare to roll out the next tax avoidance schemes down the closest tax haven rabbit holes!

This is one that bothers me - UK government is chairing the G20 and is pushing "fixing international corporate taxation"

It's popular amoungst all the member nations, but there seems to be absolutely no clue what to actually do

If anyone has a suggestion there are a lot of people waiting to listen ?

Might be an idea for the UK to close down all of the offshore tax havens we control first before asking others to do the same....

Seems like it might be kind of a prisoner's dilemma situation: the best outcome is if everyone shuts down their tax havens, but you're individually worse off if you shut down yours and the other players don't, so no one wants to do it.

>UK government is chairing the G20 and is pushing "fixing international corporate taxation"

That's rich, considering London is one of the biggest tax havens around.

http://www.guardian.co.uk/money/2007/jul/08/tax.business1

Did you realise that the article you linked was from 2007?

I think it's safe to say that the political and economic landscape has changed a little since then.

I looked around and they still have non-domicile rule. Since 2008, they added an annual £30,000 fee, but that's nothing if you're rich.

http://www.theaustralian.com.au/news/world/london-is-a-magne... http://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom1...

Every western government has off shore havens they give a nod and wink to - but it's this very prisoners dilemma that the G8 etc want to solve.

It's popular amongst the member governments. They're always after more money to waste.

Much of it comes back as invesments in US businesses, real estate, and stock markets by these foreign subsidiaries. I don't think they're actually able to bring it back into the parent companies in the US, but with good accountants and lawyers it wouldn't surprise me.

Unless it's immediately distributed as dividend or used for acquisition, the money would be subject to US corporate taxes.

Microsoft actually borrows in the US http://www.smartmoney.com/invest/bonds/what-s-behind-microso... as it's not in shareholders' best interests to initiate a money transfer to a US account.

According to themselves they "spend it overseas".

http://www.winamericacampaign.org/

They could wait around for a tax-repatriation holiday. There was one in 2004 that brought in about $312 billion. Companies paid 5% tax, instead of 35%, on all foreign revenue brought back to the states.

The theory was that companies would use that money to create jobs, but instead they bought back a lot of stock. So it's unlikely that there will be another one in the near future, unless the political winds change.

http://online.wsj.com/article/SB1000142405270230333990457640...

What they should do instead of a holiday is simply seize assets statesside with rouhgly the same bookvalue until the money was brought in and taxed in the normal way.

That would close this loophole pdq. All this pussyfooting around just underscores that private individuals are on the hook but as a company you can do just about anything.

I don't like taxes, I disagree with plenty of them, I disagree with how they are spent. But I still pay my taxes and the fact that I pay more tax on my income (which is a very small fraction of their turn-over) than some well known multi-nationals has me seriously ticked off.

Nah, what should happen is that governments lower their extortionate tax rates so that these avoidance measures aren't neccessary.

http://en.wikipedia.org/wiki/Laffer_curve

The Laffer curve has never been shown to be true, and in fact has always been shown to be false in the real world.

So... if it's "not true", what sort of curve would you get if you plot government revenue as a function of tax rates? The Laffer curve makes a lot of sense. What is difficult about it, and where politicians are likely to try and push their own agenda, is finding where revenues are maximized, which is a far more difficult proposition than proposing that there is a revenue curve with a high point somewhere in the middle, which makes intuitive sense.

Well, you do not get a curve, and there is no maximum.

https://en.wikipedia.org/wiki/Hysteresis

Same taxes with different history of taxation yield wildly different results.

It would form a curve for a given state at a given time period. Obviously you wouldn't get the exact same curve for different states and times.

It's self-evidently true as a concept, even if the exact shape of the curve and the values aren't known.

"Taxes shouldn't be too high, and shouldn't be too low" is about the most precise statement anyone can make about the Laffer curve and still be able to have it hold up in the face of the real world.

Pardon me if I'm not bowled over by that.

Well, given that plenty of governments seem to think taxation can be increased indefitely in order to support their "client state" of government employees, I'd say that was a valuable result.

If "plenty of governments" believed that, I'd expect to see far higher tax rates.

Since we have no clue about the shape of the curve apart from the two extremes it is a quite useless tool.

EDIT: According to the Wikipedia page some studies indicate that the maximum for the laffer curve in Sweden was about 70% tax.

That's a believable number. But I also imagine that the curve flattens considerably before topping out: Sweden probably wouldn't get a lot of additional revenue out of that last 5-10% in tax rates. If you were picking the "right" level of taxation, you'd presumably want it to set it somewhere near the point where the economic cost of the taxes was equal to the benefits of the government's use of the revenue, and not at the point of maximum revenue.

A 70% marginal rate is not outrageously far from where the top bracket in California will be if Washington decides the best Social Security reform includes lifting the payroll tax cap. Today's effective top marginal rate in CA is ~52% in Fed+State income taxes and another 3.8% for the high-earner Medicare tax. If SS goes uncapped, adding another 12.4%, your $1M earner is hitting 68.2%. I'm dispensing with the accounting fantasy that the "employer-paid" portion of the tax isn't actually a tax on the worker.

According to the Wikipedia page some studies indicate that the maximum for the laffer curve in Sweden was about 70% tax.

On the other hand, the introduction of a 50% income tax rate in the UK didn't work very well[1]. It caused more than £10B of income to be shifted to an earlier year, and in the end raised only a modest fraction of the predicted extra tax revenues. It looks like a few people in government failed to notice that almost everyone who has enough income to pay that kind of tax rate in the first place also has the ability to choose when they formally realize that income, and many of the wealthiest also have the ability to choose where they formally receive the income as well.

[1] http://www.bbc.co.uk/news/business-17465733

The newish top tax rate here is coming down to 45% in April 2013, after the new government finished figuring out how much of a poison chalice they had been left by the previous one. Unfortunately, this causes problems of its own, as they are now predicting a multi-billion pound shortfall in tax revenues for 2012-2013 as wealthy folk do the opposite and defer their income to take advantage of the reduced rate. Obviously they're hoping that greater tax revenues in later years will make up for that.

Worse than these individual disruptions over a relatively short period, though, is the fact that successive governments have made it very clear that they can and will mess around significantly with tax rates for high earners, which in turn creates an incentive for any big earner to talk to tax experts and either take part in legal tax avoidance schemes or at least minimise how much income they wind up with on paper in any given year until they're convinced that it's the most tax-efficient time for a while to take it and then grab the lot at (what they hope will be) a minimum rate.

At least we're not in France, where the government seem to think they can slap a 75% tax rate on the wealthy and not suffer horrendous consequences to their already business-hostile economic and political landscape...

Even if the Laffer curve is true (see the comment by wavefunction) no one knows where the maximum revenue point is. Look at "Empirical data" in the Wikipedia article: There are many possible values for "optimal tax rate" and companies have many options to play the system, e.g. always hold back enough money that there is justification for a lower tax rate.

No, nobody knows what the exact shape of the curve is, but governments should bear in mind when screwing more cash out of companies and people in order to fund pork barrell projects.

It takes a certain perspective to look at the world today and say that governments are screwing cash out of companies.

Starbucks, Google, Amazon - not so much.

"Mom and Pop" restaurants, mechanics, cleaning companies, etc etc - yep./

Given that company's minimize their tax liability any amount of tax over zero is going to be enough to induce them to such shenanigans.

No they shouldn't seize anything. That overseas money is not owed to the US Government and does not belong to the US Government. Taxes are only owed if you repatriate it. You're advocating theft as it is.

It's not a loophole, it would be double taxation.

If Microsoft earns $10 billion in China, they should pay taxes to China on that, not pay China + the US Government. Unless you're advocating confiscatory level taxation, of perhaps 60% to 70% on corporate profits.

Microsoft never earned $10 billion in China, they sold $10 billion worth of goods to an overseas entity using a tax avoidance scheme. Different thing.

I understand that parent/daughter company relationships are hard but the only thing that matters is who holds the final holdings shares. Everything else is just window dressing and obfuscation.

So by your argument, when we purchase a physical book, we should pay taxes in every locality that that book passed through.

So let's say it was manufactured in Florida, shipped from New York, and sold in California, by your logic we should be paying state taxes in Florida, New York, and California.

Is that right?

Sounds right to me. The manufacturer will pay tax in Florida, the shipping company will pay tax in New York, and the retailer will pay tax in California— all those taxes get sent down the line to me. If any of these entities are legally based out of somewhere else, I would expect them to pay tax there in addition. If the shipping company and the retailer are owned by the same entity, and they said that their revenue from shipping was $0 so they don't owe New York any tax, I'd expect New York to take a different view.

If I live in Massachusetts and earn money in New York, both states expect me to pay income tax.[0] And why shouldn't they? I'm using both of their resources.

[0] The amount paid to NY is deducted from the MA tax, down to 0. That might be different elsewhere?

A book is exactly the wrong sort of example because publishers don't generally own the rights to the book, authors do. So the argument is that if I own, manufacture, and distribute a product or service that I shouldn't be able to dodge paying taxes on it by establishing a wholly owned sham company off shore and transferring the "ownership" of some product to that sham entity and then assign all the profit to that entity thereby making it a "foreign profit" which is only taxed when repatriated. Apparently, this is going on not only with products sold outside the US but also products that never left the country. It has nothing to do with double taxation.

>So let's say it was manufactured in Florida, shipped from New York, and sold in California, by your logic we should be paying state taxes in Florida, New York, and California.

I do not think that is an accurate example of what occurred in the article.

1. MS bought a Danish Company, (This is a taxable transaction), 2. MS then sold the assets (software) of the Danish Company to an MS subsidiary in Ireland, (This is a 2nd taxable transaction, but this is where MS "allegedly" sold the Danish Company asset at a price far below the market value effectively cheating Denmark out of taxes it would receive had the Danish Company sold its asset to an independent company)

Nevermind the obvious reasons "Why" MS engaged in the second transaction, MS is paying less taxes on the asset selling it from Ireland than in Denmark.

So to change your hypothetical to more accurately reflect the article - It is more like manufacturing a book in Florida, selling it to your own company in NY, who in turn sells it to someone in Florida just to avoid charging FL Sales tax which would need to be charged by a Florida company selling to a Florida resident. Of course at first glance this seems like a smart business move, but assuming the legal analysis of the article is true, then also imagine in your hypothetical there is a law prohibiting this type of transaction to its own subsidiaries in other states to prevent the circumvention of State sales tax.

Companies don't pay taxes even if they do. Their customers do through increased pricing.

Individuals don't pay taxes even if they do. The companies they buy from do through reduced sales.

You mean cost 1.8 trillion? At some point shareholders want here money back so companies have little choice in the long term. Until then it's reasonable to keep an offshore buffer which they refill after a tax holiday.

Not without paying taxes on it. Companies like Apple, Facebook and Google have many billions of dollars in foreign banks which they aren't bringing back because they'd have to pay huge tax bills if they did. There has been a lot of pressure on the government for awhile to allow a 'holiday' where this money could be brought back tax-free temporarily, but nothing has happened yet.

Is it easy for Microsoft to get this money back into the US? And how?

Well, that's not something you want to do to Denmark, they are a member of EU and can make MS's life miserable. Plus, MS has so many assets, all over the world. They can contest it, appeal but then will pay.

classic double irish setup: https://en.wikipedia.org/wiki/Double_Irish

Thanks a lot for the traduction. This summary has been added to tldr.io, see here http://tldr.io/tldrs/5134660e28b6ae385b0000de/microsoft-owes...

They also made what is now Dynamics AX - which is Microsoft's high end ERP application.

For reference, 1 Danish Krone == 0.17 USD today

Wow, 5.8 billion on sale of what was originally a 10.8 billion purchase? That sounds steep.

This sound like a political trial though based on Denmark wanting to keep outsiders away from it's businesses and sour grapes Denmark has against MS because they moved the business to Ireland.

"Moved the business to Ireland" doesn't (usually) mean that business has actually moved - operating as a subsidiary of a holding company in Ireland is almost always a pure tax dodge.

I find it ironic that the avoidance scheme MS, GOOG, and APPL employ for European profits is called a double dutch irish sandwich.

I think the 5.8 billion may include late-payment surcharges, given that this happened in 2002 (11 years is a lot of interest).

Granted it sounds high, given that the corporate tax rate was 30 percent 10 years ago. I truly don't believe it's politically motivated, though. I could say a lot of bad things about the Danish tax system, and I do so all the time, but the Danish tax authorities are not known to be corrupt. It might be due to subsequent transactions that the article doesn't mention. Also, since the limitation period is around 5 years in this type of cases, the case may have been going on for several years. It's not possible to say from the article.

We do not know what the number is based on, as the article do not say so. It might be that the company sale is declared invalid, and any product sales made afterward is thus under danish law. Or it could be taxes of the 10.8 billion purchase but with an increased cost thanks to it now being several year later.

You need to adjust for inflation for one.

$1,000 in 2002 correspond to $1,280 in 2013 (+28%) as an example.

You are comparing 5.8 billion 2013-kroner with 10.8 billion 2002-kroner.

How is it that the initial (2002-2013 interest excluded) tax bill is 5 billion kroner, when the acquisition cost was only 10.8 billion kroner? Is the tax rate really that high? I understand that the tax is not on the acquisition itself but rather the transfer of the rights, but surely the market value of those rights should be less than the market value of the entire company at the same point in time.

In Denmark the company taxation is 25%, but it is very likely that a large part of the amount is a fine for doing it, although this is just a guess.

Furthermore, when you value a company it could be that their assets are extremely high, but they at the same time have high liabilites. This (although I do not know if it was the case), could lead to a lower price for the company, than the market value of the product.

> In Denmark the company taxation is 25%

Soon to be 22%.

I think the article said $10 billion dollars - not kroner for the acquisition (or $60 billion kroner).

This sort of tax avoidance feel unethical to me - you have 600 employees in Denmark developing this software, but all the profits are being booked in a tax haven. Microsoft should have to move the developers to Bermuda or Ireland if they want to avoid the Danish tax.

Google Translate says that Microsoft underpriced Navision software by 11 billion kroner in the "previous income year," and owes 5.8 billion kroner in taxes on that!? That sounds like an income tax dispute on annual earnings.

I don't understand Danish, I can't figure this out.

The thing is, it's unlikely that Microsoft managed to underreport 11 billion kroner in profits. From what I've read, Navision showed only modest growth, just one in a series of multibillion-dollar acquisitions by Microsoft that failed to work out.

Until 2006, Navision was part of Microsoft Business Solutions, which was a breakeven operation at best. The homegrown CRM product exploded in popularity, while the acquired ERP products stagnated. Since CRM is wildly profitable, the only way for Business Solutions to have operated at breakeven was for the ERP products to lose money.

Given the poor historical performance, it would take quite the turnaround for Microsoft to have made 11 billion kroner = $1.92 billion on Navision in 2012.

I wonder if the Danish tax authority is attempting to apply Microsoft's overall profit margin to calculate a transfer price for Navision? That would really add insult to injury when it comes to Microsoft's sorry history of acquisitions.

Sources:

(1) "... their market share in their CRM software has increased but their share in ERP has decreased." http://www.technoreporter.com/technology/software/microsoft-...

(2) "Contrary to the downward trend for its four enterprise resource planning (ERP) brethren, the Microsoft Dynamics CRM product (although still only a fraction of the overall Dynamics revenue) grew significantly in revenue year over year and surpassed the one-million-users mark in 2009." http://blog.technologyevaluation.com/blog/2010/02/15/microso...

I decided to translate the entire article to English from Danish, since this is too important to have people learn about it through friggin’ Google Translate:

https://gist.github.com/ndarville/5081765.

The only thing that really tripped me up was the corporate terminology between affiliates, companies, corporations, subsidiaries, parent companies, shell companies, etc., but I found the wording in the article to use the terms interchangeably as well.

I haven’t proofed it yet, so consider it a rough draft.

Feel free to post comments in the Gist about anything that comes to mind.

Why did they wait until 2013 to tax something that happened in 2002? That reflects poorly on Denmark.

It takes time to uncover that Microsoft had done something tax worthy without telling anyone.

Microsoft bought a danish company, then sold a huge asset from that company to another Microsoft owned company in Ireland (probably for tax reasons) then told the danish tax department that the asset was worth less than it should have been, thus avoiding large taxes.

This all takes a while to uncover, then it has to be double checked. Then you have to talk to Microsoft about it....and then you can tell the press about it.

> I decided to translate the entire article to Danish

You meant, to English from Danish.

Thanks for translation.

That’s what I get for not proofing my comment. Cheers.

Just to go full inception, this is my coverage of their coverage of our coverage of their coverage:

http://www.dr.dk/Nyheder/Penge/2013/03/04/141416.htm

Main take-away:

    * #2 on /r/technology
    * 79% of hits are currently international

Could you translate the sidebar, please? Google Translate seems to say that they want to tax Microsoft on annual income, rather than the transfer itself.

And it gives a surprisingly large amount for the amount that Microsoft is supposed to have earned. (See my comment for details of why it is surprising: http://news.ycombinator.com/item?id=5320784 )

I did a very quick translation—it does contain some important information, as it turns out.

The gist seems to be that there is 11B DKK in additional income that is subject to taxes and interest, 5B and 0.8B DKK respectively, totalling the 5.8B number we’ve come to know.

In your own words, Skat appear to allege that the deal was underpriced by at least 5B (real 2013) DKK.

https://gist.github.com/ndarville/5081765

As an Irish person I find the widespread use of the Irish tax code for the purpose of tax avoidance by multinationals deeply embarrassing. This has made the country something of a pariah among EU tax authorities without conferring any discernible benefit to the Irish economy.

http://en.wikipedia.org/wiki/Double_Irish_arrangement

> without conferring any discernible benefit to the Irish economy.

Mildly put ... Some people might say it contributed to the problems the Irish economy has at the moment and also to those of the rest of the EU, which has to compete with the low taxation and loopholes the Irish tax code offers.

At least they are sticking to the rules, even with loopholes and a low tax rate, in Ireland. Greece has much bigger problems.

Greece has both loopholes (for ship owners / shipping companies, think Onassis) and corrupt tax collectors, but their biggest [OT] problem is the corrupt government that managed to greatly increase the interest on the country's dept so the banks could earn more - on purpose, I'm sure (good reading: famous composer and author Theodorakis about this => http://theodorakisfriends.com/news/the-truth-about-greece/).

Plus all the ridiculous feather-bedding of benefits to government and other employees that were clearly unaffordable.

So true, Ireland and the Netherlands are screwing themselves and the rest of the EU out of hundreds of billions of tax income every year. What's more, even state owned companies like Dutch Rail use the same arrangement.

http://en.wikipedia.org/wiki/Double_Irish_arrangement#Dutch_...

Same for Apple, Yahoo, Google and other big companies here in Spain. They pay taxes in Ireland instead of Spain based on simple accounting tricks.

Just an example (Apple declares losses in Spain):

http://economia.elpais.com/economia/2013/02/25/actualidad/13... [SP]

http://translate.google.com/translate?sl=es&tl=en&js... [GOOGLE TRANSLATE]

Here is a better translation of the later:

http://elpais.com/elpais/2013/02/26/inenglish/1361883380_492...

Tried to submit the article, but it seems to have disappeared misteriously.

So tax competition is necessarily a bad thing? As to discernable benefit, you know better than I do but presumably the Irish are free to determine their own tax code and have arranged it to their advantage? If not, why not?

http://www.telegraph.co.uk/finance/comment/ambroseevans_prit...

does not indicate 'no discernable advantage' to me.

If you're the shareholder of a big company that can leverage tax competition, then tax competition is a good thing. If you're anybody else - starting from businesses that have to cope with normal tax rates where they operate, and compete with the aforementioned big companies - it is a bad thing.

Doubtless, true at present in which case the Irish government consider this to be to their advantage.

Please don't put words in my mouth. Tax competition that doesn't bring any significant benefits to your economy is not a good thing, because you're giving away something for nothing. I included this qualifier in my original post. Why have the government not arrranged it to the country's advantage? Because a) the government that put these rules in place was not that competent, b) it overestimated the amount of job creation that would result from offering such schemes and c) since Ireland is a small country with a relatively small economy it doesn't have that much negotiating clout. If they pulled the plug on the arrangement tomorrow many f those multinationals would just move their headquarters to Luxembourg or Lichtenstein or whoever else was willing to to offer them a favorable tax regime.

As for the Telegraph article, it doesn't really bear out your point, but rather echoes mine: "Microsoft, Google, Facebook, Twitter, and a host of household names have regional headquarters in Dublin, whether drawn by a corporation tax of 12.5pc or by the critical mass of a high-tech skills. How much value is added to the Irish economy is an open question." Those regional headquarters do not involve huge numbers of jobs, any more than the large number of US companies registered in Delaware make that state a hotbed of industrial and commercial activity.

OT:

I'm always surprised the Irish aren't more pissed off about Bonno - uses Irish tax code that says artists don't have to pay tax, then goes around boasting how many euro he's raised for the 3rd world, while back home isn't exactly roses.

The Irish I have talked to have little time for him when the topic comes up.

That doesn't bother me any; U2 has generated tons of indirect income for Ireland via tourism and overseas awareness of Irish culture (and products and services). That's the whole point of subsidizing the arts via the tax code. Most artists are earning much more modest incomes.

Things are not exactly roses in Ireland at the moment, but it's a long, long way from being a third world country.

You make it sound it's not deliberate

Why be embarrassed? It's competition in the big scale for the lowest tax rate. Ireland is getting taxes

Also, big taxes hurt the small guy the most.

In the meanwhile, Google, Facebook and others are building offices in Ireland and hiring people!

While they could do so also in the rest of the European countries if there was an homogeneous tax code among the member states.

This way they make millions from countries like Spain, Italy, Germany etc, and give nothing back.

Mind, the fault lies in how the EU is organized, it makes perfect economic sense for the companies.

> big taxes hurt the small guy the most

taxes pay for infrastructure, so while it might "hurt" the small guy proportionally the most, it also provides everyone with better infrastructure that the small guy would never be able to provide (obvious example is internet).

I'm just amused that in this whole thread the phrase "race to the bottom", which was invented to describe exactly this behavior, has not been used, when you can't move in a discussion about Android without it being used incorrectly (and often incoherently).

http://en.wikipedia.org/wiki/Race_to_the_bottom

When competition between companies lowers the cost of goods and services, that's considered to be a good thing; why is it considered a bad thing when competition between governments lowers tax rates? Lots of governments look like they could use a good dose of efficiency to me; more government services for less taxation.

It's not the rates. The point of the double Irish is that companies avoid paying even the low rate of corporation tax by assigning IP to shell companies that don't actually do anything except lease it back to the parent company so it can be booked as a tax-deductible 'expense.'

Anyone interested in learning more about how tax avoidance and havens work as well as large company 'best-practices' might be interested in reading Treasure Islands by Nicholas Shaxson.

Book site: http://treasureislands.org

Amazon: http://www.amazon.co.uk/Treasure-Islands-Havens-Stole-World/...

Disclaimer: There's a referral code in the Amazon link for my college's library

Would you happen to know what the difference is between the UK and US version? I assume it's not how they spell "color".

I think it's only language (color vs colour) and the book cover. I can imagine the UK version of the book cover would not have gone down well with the US audience (and vice versa).

The content is likely identical otherwise.

For anyone who'd like to read more about transfer pricing, here are the OECD guidelines that tax lawyers/accoutants use: http://people.f3.htw-berlin.de/Professoren/vonWuntsch/downlo.... You'll see these cited in every international transfer pricing case.

Google translation: http://translate.google.com/translate?hl=en&sl=da&tl...

Could someone do a human translation? This is enough to get the general idea, but not the details.

There isn't much more to it. As said in another comment, it's a "classical transfer pricing case".

Google Translate doesn't do a very good job though:

> Neither Honey, Microsoft or the IRS IRS wants to comment on the pending tax to DR2.

"Honey" here would be the Danish tax authority, SKAT, which means tax, but also treasure, and is often used similarly to the English "honey".

TNW article in english: http://thenextweb.com/microsoft/2013/03/04/blurred-navision-...

Done: http://news.ycombinator.com/item?id=5317835. :)

Notice that in the Google translate version 10.8 billion kroner is translated to 10.8 billion dollars.

Google Translate often does that :-)

Because it is the exact translation. It would be nice if they converted it into your currency or just leave it as the original currency.

No, kroner doesn't translate to dollars anymore than inches translates to centimeters.

> Because it is the exact translation.

No, it's not.

There's nothing exact about it, it's just wrong and very very confusing.

A currency is a unit, a scale-factor. It can only be translated if you also translate, i.e. re-compute, the corresponding measure (the number itself).

I would classify this a major bug, the reasonable thing if they don't want to fix it (since fixing it requires reaching out to a time-dependent currency conversion table, it might be a non-desirable thing to do) they should just not translate that part at all. Then it becomes up to the reader to go back and look up the currency in question, instead of just thinking it's already been done.

The exact translation of kroner would be kroner - not dollars. http://www.merriam-webster.com/dictionary/kroner

Not to mention that a Danish "billion" is not the same as a US "billion".

A Danish, Norwegian, Swedish ("biljon" ) billion is 10^12, a US billion is 10^9. It's utterly confusing sometimes, and this is one of the fewer cases where US metric makes much more sense.

US: million, billion, trillion. 10^6, 10^9, 10^12

Skandinavia: million, milliard, billion, billiard, trillion, trilliard 10^6, 10^9, 10^12, etc

PS: I don't know about the rest of the world.

> Not to mention that a Danish "billion" is not the same as a US "billion".

Google correctly translates the Danish original "milliard" to the US "billion". A 5 (Danish) billion kroner fine would be higher than our total GDP.

> this is one of the fewer cases where US metric makes much more sense.

Don't see that. A bi-llion is million million. A tri-llion is a million million million. Makes perfect sense to me.

Ah, I like to think in steps of factors 10^3. Thousand, Million, Billion, Trillion. Very rarely do you get to numbers above this (non-science related), and when you do, scientific notation is more relatable.

I think I have almost never in my life (in Norway), seen "Billiard", "Trillion" or "Trilliard" used anywhere.

As you noted, we still have factor 1000 steps. -ard is 1000 -ion.

You're right. I should also have mentioned that it was more intuitive (for me), that {mono-, di-, tri-} was the 1000 factor prefix, as opposed to {mono-|{-ion,-ard}, di-|{-ion,-ard}, tri-|{-ion,-ard}}.

I'm not arguing expressibility. It's just different names. I just found the system my country uses (long scale) to be less intuitive than the one used by the US (short scale).

Just take a look at the comparison [1], and make up your own mind on what is intuitive, and what not. I'm not saying you or anyone is "wrong". I find it hard to see good reason for the long scale, but I'll entertain arguments.

[1]: http://en.wikipedia.org/w/index.php?title=Long_and_short_sca...

A good argument against the short scale is that it has a confusing offset. A quadrillion (short scale) is 1000^(4+1)=10^15.

> Don't see that. A bi-llion is million million. A tri-llion is a million million million. Makes perfect sense to me.

Why is the million the base unit? Numbers are always written in groups of thousand, not million.

Sorry, but in this I agree with okamiueru - the short scale system makes much more sense.

It's like that in German as well, and it used to be like that in British English, as far as I know.

So Microsoft owes them metric dollars?

I think they owe WA a few billion too. www.microsofttaxdodge.com

Taxation is theft.

Especially given that surely Microsoft hasn't consumed anything even remotely close to 1 billion in Danish goverment services.

Hopefully Microsoft will be able to resist this armed robbery attempt.

Otherwise, they could simply use half that amount, $500 million, to purchase missiles and drone planes to defend themselves and counterattack (they can buy 500-1000 tomahawk cruise missiles or 10-20 MQ-9 Reaper drones with that amount).

That'll teach me to upvote after reading two sentences...

Taxation is to be expected. How much or how little can be debated.

The part I am missing is how, if MS bought an entire company for $1.8B+ and then sold a software title from that company to a subsidiary, that they should owe $1B+ in taxes.

I would assume the company Navision had many more assets than just the rights to this software: property, cash, etc.

At best, it sounds like major overreach by the Danish government. At worst, as you say, it is attempted armed robbery just because it is MS and they have money.

> Taxation is theft.

I sincerely hope you've never driven on a paved road or been able to drink clean water.

For that matter I'm sure that the public had absolutely nothing to do with your successfully being delivered, educated, and able to complain on the former APRANET/NSFNET about how taxes are by definition theft.

You're forced to use the roads. There is no practical way around government services since they're so pervasive. Just because someone benefited from a government service does not make it morally justifiable to steal.

You're also forced to breathe and drink water, are you not? Do you plan on blaming that on the government too?

I think you're missing the point some of the earlier posters were trying to make.

It's difficult to justify taxation by saying that it's spent on public services that everyone uses if you can't also demonstrate that the same money spent voluntarily by the taxpayer on private provision of the same services couldn't have achieved the same or better results. The provision-of-services argument alone doesn't allow for the opportunity cost of all that tax money.

However, if the government is the only provider of a service and doesn't allow for private competition, as is often the case with the kinds of service being mentioned in this thread depending on where in the world you are and what your system of government is, then clearly it's difficult or even impossible to measure how well private competition would have done instead. Some cases of large-scale privatisation of important services have worked very well, yet other cases have failed horribly, so there's no obvious, black-and-white case for whether tax-funded public services are better or worse than privately funded commercial ones.

For air and water at least it's not a 'provision of services' argument.

Those are shared resources and as such require a way to ensure that assholes don't ruin it for everyone. I mean, right? We can't even make safe concurrent algorithms for a single computer where we control all the code without using primitives like CAS, locks, etc. Whether it's the guy with the largest club or government as we know it, that control of shared resources is done by government by definition.

Without control of those shared resources it's uneconomical to re-clean the air or water sufficient to provide for it.

Additionally even if private companies can do it cheaper that may not be better overall. What would the poor do if there were no sources of clean water? Would they just sit there and die? Or would they gang up and take it by force from those who can afford it?

People pay these costs all the time, whether they realize it or not.

More importantly, people often require services in the future that they refuse to plan for ahead of time, which wouldn't be a big deal except for when their failure to plan starts to affect other people.

For example, you can let a house burn down out in the sticks if someone doesn't pay into a fire-fighting fund (whether public or private).

In a city it is simply unacceptable to let a building burn; it would catch the buildings around it on fire. Those residents have to contribute whether they think it's a good idea or not.

I mean shit, I wish it were as easy to have a functioning and vibrant society as simply blaming the government for everything but people always seem to miss that they'd simply end up subservient to whoever the next despot is who decided to wield force. As long as you live in a world with other people you are never completely free of politics or government; someone will always have a bigger club than the other and so you can either deal with the world as it is or fall prey to those with less idealistic principles.

Right, so in the cases you're talking about there, you have made some sort of argument that government is necessary and therefore needs to be funded. However, I can't help noticing that everything you described there collectively represents a tiny drop in the ocean of what a lot of governments do, and the total cost represents a similarly tiny drop in the ocean of the tax those governments charge everyone to fund themselves. Making an analogous case for many other, much more expensive government activities is not so easy: medical care, education, personal security, provisions for the elderly, energy production, housing, all these have been provided effectively as a public service, a private enterprise, or some hybrid.

Taxation is not theft. You're free to leave, but as long as you stay in our territory, you'll have to stick to our community rules, and that includes taxation.

There's a social contract which you implicitly sign. Take it or leave it, but stop trying to impose your ideals upon society.

It's funny how liberals can't stop ranting about impositions but fail to realize they're denying society the right to assemble as a state.

You do realize that "Taxation is theft" is about the least liberal thing a person could say, right?

http://en.wikipedia.org/wiki/Economic_liberalism

"Economic liberalism contrasts with ideologies like social liberalism and social democracy as well as economic orders such as socialism, market socialism, welfare capitalism, mercantilism and state capitalism [...] opposes government intervention on the grounds that the state often serves dominant business interests, distorting the market to their favor and thus leading to inefficient outcomes"

Et cetĕra.