Multinational companies have long used offshore havens to reduce their U.S. tax bills, but the sheer size of Microsoft Corp.'s disclosure that it may owe nearly $29 billion in back taxes has jolted industry experts.
The technology giant said Wednesday in a securities filing that the Internal Revenue Service has asserted that the company owes $28.9 billion in taxes on its global operations for 2004-2013, plus more for penalties and interest.
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Said J. Clark Armitage, an international tax lawyer at Caplin & Drysdale in Washington, D.C.: "It's a huge number."
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It's not clear what type of penalties Redmond, Washington-based Microsoft might face, but interest could add more than $2 billion to the final bill, Armitage said.
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The agreements are particularly lucrative for companies whose core asset is intellectual property with lucrative royalties, like Microsoft. "All the value in Microsoft is in the IP — that's what gives rise to their profitability," Armitage said
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