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IRS Is Suing Facebook Over Asset Transfers In Ireland (fortune.com)
An anonymous reader quotes a report from Fortune: The Internal Revenue Service (IRS) has sued Facebook on Wednesday to force it to comply with summonses related to a 2010 asset transfer. Fortune reports: "According to documents the IRS filed in San Francisco federal court, the agency suspects Facebook and its accounting firm, Ernst and Young, understated the value of intangible assets transferred to Ireland by billions of dollars. The IRS says it is seeking an order to enforce six summonses that asked Facebook to appear at the agency's offices in San Jose, Calif., and to produce papers and others records. According to IRS agent Nina Stone, Facebook failed to show up at the appointed date of June 17, and nor did it provide the documents. The dispute arose as a result of an ongoing audit of Facebook by IRS that stretches back to 2010. In that year, the company chose to designate Facebook Ireland as the rights-holder for its worldwide business outside of the U.S. and Canada, and also to transfer intellectual property assets such as its platform and 'marketing intangibles.' The crux of the disagreement between Facebook and the IRS turns on the arcane question of whether the assets in question could be transferred in their entirety or if, as the agency argues, they are 'interdependent.' [The agent's declaration can be found here.] Such arrangements are common among U.S. tech companies, and seek to reduce tax payments by scoring revenue in low tax jurisdictions like Ireland, while having higher tax countries (especially the U.S.) reduce profits by paying to license intellectual property from overseas subsidiaries."
Facebook is just like everyone else...
If any of us common people failed to show up or provide documentation we would be liable for whatever the IRS claims we owed. Nice to see the double standard isn't just for Hillary.
Wow, I can't believe that someone named Zuckerberg would try to do something illegal with taxes he owes this country! Not with all of his past businesses "experiences". The man is a philanthropist after all (the Internet said so).
I'm an American. I love this country and the freedoms that we used to have.
I thought that tech companies, like Facebook and others, leaned toward supporting Democrats. The Democrats constantly crow about how the rich aren't paying their fair share when it comes to taxes. If Facebook's executives are so committed to the cause, then why all the accounting chicanery? Why not leave the assets in the US and pay their "fair share" of taxes? Or do moves like this imply that the US tax rate is too high? So confusing ...
No way, I simply cannot believe that a giant, faceless, mega-rich company like Facebook would play fast and loose with the books.
Next you'll tell me that Anna Nicole didn't marry for love!
Just cruising through this digital world at 33 1/3 rpm...
You think they can cram all those people in there?
“He’s not deformed, he’s just drunk!”
Timmy (CEO Apple Inc.) and Apple Inc. are the BIG FISH.
ha ha
I'm sorry, but Facebook is an American corporation and should be paying taxes to the IRS. You want to pretend you're a foreign entity, you want to do your Irish Double Dutch Sandwich bullshit, don't be surprised when the piper comes calling. Everyone knows your income is being earned in USA.
If you feel you're a foreign corporation, fine, surrender your big California headquarters and go live in Dublin, Zuck. See how that works out for you.
That's how business is done these days.. Bend all the rules in your favor and ignore the authorities until you can't any more, and then complain about how unfair the world is.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
1. Facebook paid no UK corporation tax in 2012. 2. Google's UK tax deal is a joke at our expense. 3. Microsoft pays no UK tax on £1.7bn of online revenues. 4. Apple pays just £12m UK tax on £2bn profit.
Its the IRA that has jurisdiction in Ireland, not the IRS
watching two entities fight, neither of which are my friends, provides interesting entertainment.
its also the only time I could imagine wanting the the IRS to win ;)
there must be a german word for this (is there?)
--
"It is now safe to switch off your computer."
Fake AND Gay.
Facebook is the least of the concerns facing tax evasion, such as the Clinton foundation for one.
Try suing one of your untouchables there IRS and see how that works out for ya.
Got Geometrodynamics? Awe, too hard to figure out? Too bad.
I guess someone is being punished for not removing all the anti-Hillary posts....
Wasn't it like a week ago that Facebook announced they were going to change their internal rules to stop their employees from targeting conservatives? And now the IRS, an organization well known for targeting conservatives, has sicced their dogs on Facebook. Very interesting coincidence of timing.
And the legal problems won't stop until they do.
Obviously. Facebook is 'new money'.Zuckerberg is much reviled because they can actually pin a name and face on him, same with guys like Bill Gates. The old boys club is quite a tight club and do you honestly know who any of the really rich people pulling the strings are? They stay hidden so you can't trace them back to anything or find them. The government could never take on the real problems so they go after low hanging fruit like Facebook.
After all, he still has lots of money to give to her.
I've wondered forever why this hasn't happened to all of the major companies. Clearly they all have done such gross undervaluation of corporations IP assets, otherwise it wouldn't avoid any taxes for them.
We should at least try.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Even better - regardless of where your headquarters are, if you make profit in a country with rules of law, stable government, etc. then you should pay that country's taxes on that profit.
This exactly illustrates why companies are able to get away with this crap. It is fairly trivial for an internet company to put the assets that are responsible for the profit in a different country and voila, the profit was made there and not here. If the customer in the US and the server is in France, the company is based in Ireland and the money is exchanged in Costa Rica, where was the profit made? This is not a trivial problem. Where profit is made is not as simple a concept as it seems and I'm a certified accountant so I ought to know.
The only way to solve these problems is to do two things A) big markets like the US and EU need to establish and enforce laws that within their markets force the companies to declare their profits in a way that makes it difficult to push profits to another country and B) they need to establish international trade agreements between those markets making it difficult to pull these sort of overly clever stunts by playing countries off against each other. If the US and EU governments were to cooperate on preventing these companies from playing shell games with tax money a lot of these problems would be mitigated. Even companies as big as Facebook need to do business in those places so if the governments of the US and EU start playing hardball there really is nowhere for them to run.
I expect taxes will be gathered based on the location of the transacting individuals.
While it's probably the most elegant solution in theory, the challenge in that is that it runs afoul of innumerable existing tax laws and practical constraints. If I live in Ohio and I buy something from XYZ.com in Washington, the State of Washington is not allowed to tax me in Ohio and even if they were they have no mechanism to collect those taxes. It's even worse internationally because the US cannot collect taxes from a citizen of Ireland thanks to sovereignty. And for a company like Facebook they are selling things that intangible so it can be nearly impossible to know where the customer is actually located with any certainty unless the customer volunteers that information. At least with Amazon you typically have a tangible product with a source and a destination. Someone on Facebook could be located anywhere and even worse, Facebook could be located anywhere. So you can't pin down the customer location and Facebook could make it difficult to pin down the server location if they wanted to. Solving all this would require a huge rewrite of domestic and international tax law (including probably the US Constitution) plus require a huge amount of cooperation between sovereign states that to date haven't been all that cooperative.
So I agree with you in principle but I don't think you appreciate how difficult what you are proposing actually would be to implement.
This seems to be a case of Facebook going one step too far (and they deserve to be hunted down for it), however current laws mean for the most part their fair share is SFA or Zero.
I completely disagree that "fair share" equals what they are legally obligated to pay. Just because they found a clever loophole in the tax law doesn't mean what they are doing is fair or right. Just because what Facebook does complies with the law doesn't make it right. Or to use an extreme example are you arguing that things like Jim Crow were fair because they complied with the law of the day? Because that is basically what you are arguing (legal = fair = right). Sometimes the laws are poorly written but that doesn't make the law fair or compliance with the law right. All it really means is that if they are doing something legal but wrong that we should change the laws to outlaw it in the future.
tax laws need to change, lower corporate laws with harsher and stricter rules for moving assets offshore would help to fix this. It is far better to get 10% of billions than 30% of nothing.
Agreed that the tax laws need to change. Particularly the bits relating to transaction locations, locating intangible property, and probably taxation as a function of gross receipts instead of profits for multinational corporations. If a company finds it worthwhile to devote a large staff towards finding convoluted ways of minimizing their tax burden then something is clearly amiss with the tax laws.
There's nothing "fair" about what the ridiculously large mafia-style variable-rate kickbacks the IRS and US government is attempting to extract from enterprises and members of the public.
That's a rather tortured way of saying you don't think they should be obligated to pay taxes. Why not just come out and say it?
I say kudos to Facebook, and any company who manages to still exist in the US and provide jobs and valuable goods and services without being raped by the IRS.
So as a taxpayer I'm supposed to be ok with picking up the tax burden that Facebook is dodging because they found some sneaky loophole to get out of paying their tax bill? Maybe you're fine with that but I'm not. I don't give a shit if what they did is legal or not. We have a $17 TRILLION national debt and I think it's quite appropriate that Facebook help out with that. They enjoy the benefits of being a US corporation without the responsibilities.
And "How dare the government demant FB pay its fair share..." is a rather tortured way of saying you think they should have to pay more taxes to the US for profits made overseas.
It's called sarcasm. Chuckle more. It's good for the soul. You don't have to agree with it.
But seriously, arguing that those profits were made overseas is a very murky question. I'm an accountant so I ought to know. Facebook like many other companies has set up what amounts to a legal fiction regarding where profits were actually made. They set up operations in a country where they do basically no significant labor and have minimal assets and merely run the money through that jurisdiction. Arguing that the profits were made there is to accept that legal fiction at face value. Facebook staff (mostly) isn't there, their servers (mostly) aren't there, the customers (mostly) aren't there and the advertisers (mostly) aren't there. In other circumstances we call that money laundering and that is a pretty fair description of what Facebook is doing. It might be legal but it's money laundering all the same.
Cuckerberg thinks YOU should be the one getting screwed, not his elite ass. Not only does he think you should pay more taxes, he thinks you should earn less too.
On the same day they announce both of their chat programs, instead of just whatsapp, will have end-to-end encryption, their audit escalates.
I am not concerned that the Emperor is naked because I was born under a naked Emperor. Everyone keeps pointing out the nudity, but too few talk about the "assault" rifle he's holding in his naked hands. because it could never happen here, right? but it has already been happening, for a while now.
The Dems doing stuff like this is a result of the sharp turn right that happened when Regan took office. The Repubs formed a really nasty alliance out of wedge centered on social issues and a healthy dose of bigotry. They spent 40 years building that system with the likes of Karl Rove and the Southern strategy. It's naive and unrealistic to expect the Dems to tear It all down overnight. Compromises will be made. The solution isn't to throw your hands up and surrender. You do what Obama and Bernie do. You go as far left as you can. Vote for the most left leaning candidate you can. And for God's sake vote in your mid term election. You don't fix a problem this big overnight...
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Are you an idiot? So many fucktards just want to get a lick in on Hillary, which has nothing to do with this.
This shit started in 2010.
I'd like to see the interest penalties for 6 years of evasion.
Maybe software licensing should be abolished. Let companies and individuals buy software and use it as property and pay taxes in the location where it is used. It may also solve a lot of anti-trust like behaviour in the software industry.