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IBM loses $55m battle with Australian Tax Office

IBM has lost a court case against the Australian Tax Office, which will cost the company $55 million Australian (£35.5million) in unpaid taxes.

IBM filed a lawsuit against the Australian Commissioner of Taxation in July 2009 over claims that it owed substantial sums of tax on earnings from its Australian subsidiary.

IBM said that its subsidiary signed a software licensing deal in 1987 that permitted it to use, distribute and market software designed in the US and that it would pay 40 per cent of its revenue to the main company in return.

However, IBM claimed that a large amount of this should not be considered revenue or royalties, on which tax would need to be paid. It said that the technical definition of “royalty” did not apply to some of this money and thus the company should be exempt from paying taxes on it.

Justice Annabelle Claire Bennett dismissed these claims and ruled that the company was liable to pay taxes on all of the disputed sum.

A spokesperson for IBM Australia told ITNews that the company was disappointed with the decision, was reviewing the ruling and that it would continue to meet its tax obligations.