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Now Microsoft comes under the tax spotlight

Microsoft has become the latest multinational firm to be accused of avoiding millions of pounds of corporation tax by channelling its revenues abroad.

The software giant has been using a legal loophole to avoid paying UK tax on £1.7bn of online sales of Windows 8 by funnelling the proceeds through Luxembourg, according to The Sunday Times. An office in the principality staffed by just six people receives hundreds of millions of pounds of sales from the Britain and other western European countries, the newspaper reported.

Microsoft's operations in Ireland also receive £1.7bn of revenues from the UK, allowing the company to avoid paying any levies on the sum to the Government, though one marketing concern run by the business in Britain does pay corporation tax.

The claims were published as the Chief Secretary to the Treasury, Danny Alexander, said that multinational firms who use tax havens and other tax-avoiding devices should realise that paying tax is not an "option" like putting money on a collection plate, but an "obligation".

"Taxation for big companies, or for anyone in society mustn't be a voluntary arrangement," Mr Alexander told the BBC. "Thinking of the tax system as if it is like the church plate going around on a Sunday is completely wrong. Paying tax is not a voluntary choice; it is not something you can just chose to do because you think it will please your customers; it is an obligation."

Amazon, Starbucks and Google have come under intense pressure for considerably lessening their tax bills. Last week Starbucks said it would donate of £20m to HMRC after being criticised by a Commons committee over its tax arrangements.

The offer was dismissed as a "stunt" by the pressure group UK Uncut, which staged demonstrations at Starbucks outlets across the UK at the weekend. But the London Mayor Boris Johnson defended companies which look for ways to minimise their tax bills. "Now Starbucks has announced they are going to be making this payment I think people should welcome that," he told Sky.

Last week the Public Accounts Committee called for legislative change to ensure firms report tax practices transparently, with prosecutions rather than deals for those found to be avoiding tax.