The Chinese government doesn't want to embarrass whichever US multinational it just slapped with a US$140m bill in back taxes – but let's just say it's large and its name begins with the letter "M."
OK, it's Microsoft. But neither China nor the software giant are coming right out and admitting it.
According to a story from the state-run Xinhua news agency, the firm in question is one of the largest 500 companies in the world and it opened a wholly-owned subsidiary in Beijing in 1995 – a description that only matches Microsoft, Reuters notes.
Redmond founded Microsoft (China) Co Ltd in Beijing in 1995 and that's still its operating arm in the Middle Kingdom.
The news story claimed that the unnamed company had admitted to tax evasion and its China subsidiary had agreed to pay 840 million yuan ($137m) in taxes and interest on back taxes, plus another 100 million yuan in taxes in 2015.
What's believed to be at issue is "transfer pricing," a way of booking payments between subsidiaries that can have tax advantages for the parent company.
For its part, Microsoft has not admitted to being the company in question (although it hasn't denied it, either), but it has issued a brief statement on Tuesday:
In 2012 the tax authorities of China and the United States agreed to a bilateral advanced pricing agreement with regards to Microsoft’s operations in China. China receives tax revenue from Microsoft consistent with the terms of the agreed advanced pricing agreement.
Yet China isn't the only country that's curious about Redmond's accounting practices. The US Internal Revenue Service has reportedly been sniffing around, too, prompting Microsoft to sue the government for the right to review documents related to its investigation under the Freedom of Information Act.
Pressure from regulators is greatest in China, however, where the PRC government has been tightening the screws on US tech companies, several of which have been accused of abusing monopolies in the region – Microsoft included.
In July, Chinese authorities raided several Microsoft offices and reportedly seized documents as part of an antitrust investigation.
There's no telling whether there's any connection between those raids and Microsoft's current tax troubles. According to Xinhua, however, there was ample evidence to suspect the software giant of dodgy tax practices. While other US companies were booking profits from their Chinese subsidiaries, the paper claimed, Microsoft reported losses in excess of 2 billion yuan ($326m) for six years, which the taxmen concluded was "unreasonable." ®