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back to article Microsoft EULA lands it with $175m Indian tax headache

"The Product is licensed, not sold." Those six words just cost Microsoft's Indian operation $87.5m (350 crore) in tax payments and the same again in interest. Basing its ruling on the terms of Microsoft's own EULA (end-user license agreement), an Indian court has ordered the company to pay tax on royalty income generated in the …

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Huh?

People actually *buy* software here? I have never seen a licensed copy of XP on a personal computer till date (excepting enterprise systems). Heck, the blokes in the shop will install XP onto your new system and give you a freshly-burned copy of the install disc to boot. They'll even give you pirated copies of popular software (e.g. Photoshop, Office, Visual Studio, Oracle etc).

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Anonymous Coward

Creative accountancy

I personally believe that all "creative accountants" should be shot. Or something equally nasty. I also don't understand why companies like MSFT pay taxes only in countries where their headquarters are. Thus they earn cash in whole world and funnel it to States.

That's the reason why States will do anything to protect them. Somebody should finally stop that bu***hit.

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@AC

Umm did you RTFA? MSFT is not paying those taxes in the US either. They doing whatever they can to get out of the Taxes - US or otherwise. I doubt they paid them in Singapore.

By the way - you need to get out more. BUSH != US

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Happy

accent

I coundn't help reading the quoted parts with a thick indian accent. Reminded me of my days in engineering school.

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Coat

@George Shultz

Hi george,

I think AC did read RTFA: I suspect you didn't? (or at least closely enough)

"Double Tax Avoidance Treaty" suggests that the treaty assist US companies to avoid having to pay taxes in 2 countries, preventing them from paying the tax in India, but still making them taxable in the USofA. <http://incometaxindia.gov.in/publications/9_Income_Tax_For_NRI/Chapter012.asp>

I think you also need to look up the spelling of "Bull shit" Clue: it not the same a "Bush llit"

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Paris Hilton

I'm very confused...

Are people really surprised some one (company, person, intelegent ape, ext...) is trying to avoid taxes? really? Avoiding taxes is the American pass time. We started a war with the most powerfull nation on earth over this stuff... really its in our blood.

These companies need to start going over the EULAs... this one probably did what MS wanted it to do in the US and EU, but really shouldn't they have consulted local council to make sure this wasn't going to bite them in fastest growing tech country in the world?

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Not any more

Tax evasion is no longer the American-dominated domain it used to be. You should see the situation here in India. The so-called 'black money' economy is said to be at least as large as the mainstream economy. The income tax people regularly conduct raids on the residences of powerful people (politicians, police officials). They recover astronomical amounts of cash, gold, gems, land title deeds etc etc.. Most of this, of course, is either bribe money or public money siphoned off through various scams. You lot out there may think your politicians are corrupt, but it's nothing, nothing compared to what goes on over here.

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Pirate

Bwahhhahahaha!

greed may not be self-regulating, but if it is rapacious and shortsighted enough, it can sometimes be self-defeating.

MS EULA, indeed. it really does take a lawyer to read all the way through those dozens of pages, doesn't it?

ahh, that was very satisfying. not often i get such a good laugh out of Ballmer & Co.; usually, they cause me to lapse into a stunned, incredulous silence ("i've seen that kind of ruthless avarice before, but the cheek, the cheek!...").

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OT: What's your problem, Aditya?

That's the second time you've rubbished India and Indians. Is there nothing better you can do? Sure, there is corruption and piracy, but your comments imply that all Indians are creeps and there is nothing more than scams and corruptions in India.

Please consider the impact of your comments in shaping the perceptions of users who may not know better about India.

Sorry about the OT post, folks.

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So the question is...

Does MSFT even pay taxes? I seem to remember an article either here or at The Inq, that stated that MSFT has bilked Washington, the state they are based in, out of hundreds of millions of dollars over the last decade. I suppose they might pay some kind of token tax to keep the IRS off their backs... but other than the payroll taxes that they withhold for their employees, what do they contribute to the tax stream?

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Bronze badge

Think of Phorm

Microsoft, it seems, are trying to do the same thing with tax liability that Phorm are trying to so with private personal data.

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Anonymous Coward

They will appeal BEYOND the Indian Supreme Court

"It says Microsoft will probably appeal the ruling all the way to India's Supreme Court."

No, if they lose there, they'll fund politicians on condition they reverse this (and donate a token amount to the opposition so they can't be accused of buying laws), if that fails, they'll do the same in the USA and try to make it a trade dispute.

Or have we forgotten how they funded Bush in 2000 and any politician that agreed with reversing their anti-trust enforcement, and how the DOJ promptly agreed a 'settlement' that amounted to a reward?

I wonder if they're happy?

http://uk.finance.yahoo.com/q/bc?s=MSFT&t=my&l=on&z=m&q=l&c=

It's not just that they're treading water since 2000, with the latest Cheney inspired increase in the money supply, all that freshly minted cash is going to the security industry, not to IT. So they're share price measured in more solid currencies like the Euro is actually dropping.

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@Venkat

You mean that US and European companies are really moving to India because it is a growth area they want to get into not it is a growth area they have inspired through dodging taxes?

You will be telling us next that the systematic rape of minorities in oil rich regions of backward countries is really just a Shell game, they don't really mean any harm.

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IT Angle

This may have significant repercussions outside India

Leasing and licensing is treated differently from sales in most taxation systems. So while the Indian money is pocket change by the Microsoft standards, the amounts it may owe in other legislations may end up being really really painful.

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@ Venkat

I'm sure even heystoopid would agree that they don't shag sheep in India either. Mind you he doesn't object to giving the Kiwis a serve every now and then.

I would agree though that slagging off your own kind isn't as much fun as slagging off others.

"No one can be as calculatedly rude as the British, which amazes Americans, who do not understand studied insult and can only offer abuse as a substitute." Paul Gallico

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National pride

""No one can be as calculatedly rude as the British..."

I glowed with pride at that. At last! Something we're world class at.

Then I thought "Whoa! He's obviously never met the French."

As to Microsoft avoiding (or, in this case, evading) tax, hey guys why the surprise? The big story would be MS (or any huge corporate) structuring to pay *more* tax.

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re: So the question is...

Many large corporatons pay a little tax as they can manage, its true.

But regardless of the avoidance, what do they contribute? While I personally think the whole process is somewhat dispicable, its undeniable that the underlying activity of corporations is more help than hinderance to an economy. As you say, in the first instance there's the income tax from its employees. And of course there's the fact that those employees actually do have jobs and spend their money and so on. Then there are the jobs that product sales generate and so on. While they might not contribute directly to an economy, the reason they get away with it is because no legislator is silly enough to think that their impact isn't overall positive and pushing them into other states or countries is generally a bad thing. Its why lots of smaller or less developed countries go out of their way to offer tax breaks to companies to bring in their business - they know the net effect is going to be bigger than the actual corporation tax.

Unfortunatley, even the most evil of companies have some positive effect.

Also, does anyone really think Microsoft is doing anything but shrugging at a tax bill of $87 million?

And finally, for all the good OSS claims to do, what is its realy economic impact? (just to annoy the software for free bunch).

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Linux

Does not make sense

Did not make any sense to me, but I am glad anytime that I see MS getting taken through the cleaners the way they do to end users. Bout time that someone else like MS is getting screwed by thier own EULA.

I love irony.

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Pirate

Re: re: So the question is...

Matt, yes. What DOES MS or the other companies produce for the country?

Bill Gates kept getting more money in than out (despite 10 years of giving money to charity, he ended up with more...). MS hoard their "winnings" and aren't spending millions.

So where's this Keynsian Multiplier coming from??? Poor/middle-class people. Who pay taxes and not enough to pay an accountant to avoid them and still end up on the deal. Rich people lend their money to these poorer people at a profit to them, siphoning out the money that these people could spend rather than hoard.

So what DO the corporations give in return for paying no or little taxes?

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Thumb Up

Nice to see someone standing up to MS

So its a 'product' to the taxman and a 'licence' to the customer.. hmm looks like they are trying to have their cake and eat it.... so pay the tax or the eula is broke, meaning copying is legal, which, in India, was assumed anyway...

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@ Matt

"And finally, for all the good OSS claims to do, what is its realy economic impact? (just to annoy the software for free bunch)."

Helps keep economy stable by preventing MS-like monopolistic business practices.

Reduces traffic by extensive use of online delivery.

Reduces power use due to lower hardware requirements.

No expensive anti-competition/tax-avoidance/patent investigations draining public resources.

Lower IT support costs as users are less able to cause damage because most can't figure out how to install anything.

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Happy

Tax structure for MS as MS structure is for licensing

Think the title says it all. The Tax structure that MS should be paying should be just as difficult to negociate as the licensing structure for MS is.

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IT Angle

@Sceptical Bastard

<""No one can be as calculatedly rude as the British..."

I glowed with pride at that. At last! Something we're world class at.

Then I thought "Whoa! He's obviously never met the French.">

Switch that glow back on old chap, the French are calculatedly ignorant, it's because they lack the imagination to be properly rude

On topic,

Microsoft shafted by it's own EULA, can't think of anything that may stop me ROFLMFAO

BTW Where's the IT angle MS has been a marketing company for a decade now :)

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Coat

gracemac?

sureley microsoft would have picked any name other than graceMAC to pimp its operating sysems!

AC (Aquiring Coat)

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Happy

Where's the problem

All they have to do is issue a phone number to M$ and insist that M$ use the Call Centre to obtain a reference number for their payment...

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Aggressive Tax Avoidance

Its known as "aggressive tax avoidance" and is being tackled by governments all over the world to try to stop the haemorage of tax revenues, by the likes of Microsoft. Some countries, such as Ireland, have really wonderful additions to their tax codes- like Section 811 of the Irish Consolidated Tax Act, designed to target any activities which are deliberate activities whose sole purpose is to minimise or avoid paying tax.

The issue of transfer pricing, which Microsoft normally try to argue, is a related matter- but also under increasing scrutiny.

S.

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@donald

Considering the infinite difficulty of said licensing structure, how do you propose we build up their tax structure?

No sane man would be able to do it... Hmm, there's an idea. Let's hire an asylum to make a tax structure for MS. Should keep their accountants busy until the next OS release.

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about time,

If they want to let me think i am buying when i am liscensing, and force a EULA on me when i have no way to it read prior to purchase and implement non-legal conditions in said EULA, then its about time they were taxed as such.

This is a trick even our penny pinching Gordon brown missed, if you liscence something then you own and therefore can be taxed on it. There must be a way that MS can now be liable for tax on every installation of windows as a service/licensed to use software.

EULAs like most business techniques aren't fair or legal but it takes time for legisaltion to catch up with the tricks employed by MS etc to fill their coffers.

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@ analyzer

<Switch that glow back on old chap, the French are calculatedly ignorant, it's because they lack the imagination to be properly rude>

I was under the impression that the French are arrogant, not ignorant?

Not sure who are ignorant, but maybe the Americans (... of the world outside their borders)?

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Happy

@ Remy Redert

Never said it would be easy BUT it would keep MS busy running a few CPU cycles trying to figure it out.. I know between me and another 40 ppl in my department that we still are not sure if we have the "right" licensing structure for the organisation!?!?!?!?!?!?!?!?!

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Happy

@Venkat

Welcome to El-Reg.

You appear to have been absent for the last few days while we Brits were slagging off Terminal 5, BAA and British Airways, while simultaneously disparaging the 2012 Olympics and how they will also fail miserably - It is a national pastime, here... How about the fiasco with HMRC losing a couple of CDs...

Trust me, the British economy has never suffered as a result of anyone slagging off the morons that run the country or the morons that rob us blind while avoiding taxing themselves...

I'm sure India will be equally immune of a few home truths being spoken about it from a local perspective.

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Coat

@ Rusty D

What's the old joke again? Canada could have had the best of all three countries that have an influence on it? American Ingenuity, British Culture, and French Cuisine, instead they chose the worst: American Culture, French Ingenuity, and British Cuisine.

Mine's the coat next to the warm ale and fish and chips.

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Pirate

Equal opportunity offender

@ Welcome AC

many people in Eastern countries still have national pride (and lack the American excuse - see below); give them another 10 years of industrialization, consumerism, and subsequent outsourcing and layoffs, and they'll all be as cynical as the well-informed skeptics of the West.

@ Rusty D

most Americans are AT LEAST as ignorant about their own country, as they are about other countries. for example:

[1] they have no idea that they voted themselves a corporatist government (twice!), that is trying to tear down any laws that protect individual freedoms, any regulations that restrict corporations, and any oversight for what it and its corporate sponsors are doing; all this while methodically building a police state.

[2] they do not understand that their current economic crisis was directly caused by banking deregulation; specifically, the 1999 repeal of the Glass-Steagall Act, which was made law in 1933, to prevent another 1929-type meltdown and Great Depression. i believe that the lobbyists who made this repeal possible, should be fed to the pigs.

[3] they never consider that the US is only 5% of the human race, and therefore, it is prudent to care about what the other 95% thinks and does; many of them are also innumerate, and would have no use for these figures.

...and that's just the current events, never mind history, geography, technology, philosophy, etc. before the hurricane hit, better than 50% of the population didn't know where New Orleans was located, if you asked them to point it out on a map. some of them found out when it flooded and they saw it on the news; most still don't know, or care.

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Pirate

Equal opportunity offender

@ Welcome AC

many people in Eastern countries still have national pride (and lack the American excuse - see below); give them another 10 years of industrialization, consumerism, and subsequent outsourcing and layoffs, and they'll all be as cynical as the well-informed skeptics of the West.

@ Rusty D

most Americans are AT LEAST as ignorant about their own country, as they are about other countries. for example:

[1] they have no idea that they voted themselves a corporatist government (twice!), that is trying to tear down any laws that protect individual freedoms or the environment, any regulations that restrict corporations, and any oversight for what it and its corporate sponsors are doing; all this while methodically building a police state.

[2] they do not understand that their current economic crisis was directly caused by banking deregulation; specifically, the 1999 repeal of the Glass-Steagall Act, which was made law in 1933 (to prevent another 1929-type meltdown and Great Depression). i believe that the lobbyists who made this repeal possible, should be fed to the pigs.

[3] they never consider that the US is only 5% of the human race, and therefore, it is prudent to care about what the other 95% thinks and does; many of them are also innumerate, and would have no use for these figures.

...and that's just the current events; never mind history, geography, technology, philosophy, etc. before the hurricane hit, better than 50% of the population didn't know where New Orleans was located, if you asked them to point it out on a map. some of them found out when it flooded and they saw it on the news; most still don't know, or care.

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Paris Hilton

Truth

I don't give a rat's ass whether I'm disparaging India or not. What I said was true and as such I don't care what impression it may give anybody. Anybody who's tried dealing with bureaucracy in India will agree with what I said. Sure, there's a lot of good stuff about India, but until somebody takes an AK-47 to the political leadership, it's not gonna show itself. Besides, what effect are a few comments on El Reg going to have, anyway? Not like anybody important ever reads this rag, innit?

Paris, because even she's not this sensitive.

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