Like Al Capone alleging an alternate Crime as a quicker way to Prosecute Social Media Gangster?
Facebook is in hot water once again; this time with the Internal Revenue Service. The IRS filed a lawsuit against the social network company for undervaluing a property it sold to an Irish subsidiary in 2010. The suit went to court in San Francisco on February 18th and Facebook expects that it will last three to four weeks.
If Facebook loses the suit, then the company will owe the IRS up to $9 billion in unpaid taxes plus interest and penalties. Facebook, however, refuses to plead guilty, claiming that its estimates were accurate when proposed, as the company was yet to receive immense ad revenue or reach wide international appeal in 2010.
Just to clarify, what Facebook “sold” to Ireland in 2010 was not exactly a proper sale. Essentially, it was the original “American” Facebook outsourcing itself to its “Irish” Facebook subordinate. Such is not an uncommon practice for global businesses, especially in tech, for Ireland has very low corporate tax rates and thus is an easy place for companies to pocket extra billions of dollars in royalties every year.
While perhaps ethically shady, all of this is indeed legal for an American enterprise. It is but a sneaky loophole that Facebook is certainly not the first or last to take advantage of. According to the IRS, though, Facebook undersold itself to Ireland and thus ends up with a tax evasion charge.
Although a Pittance for the Giant Company there appears to be a Growing Pattern of Problems at Facebook
This is not the first time that a tech company has been caught red-handed getting criminally avaricious with this loophole. The European Union charged Apple Inc over $15 billion for receiving illegal Irish tax benefits in 2016. Similarly, just last year Google paid $1 billion after a French investigation dug into its international tax record. Google announced at the end of 2019 that it would stop abusing Ireland and the Netherlands for their tax incentives.
The trial is ongoing, and will see statements from Facebook executives such as hardware chief Andrew Bodsworth and Chief Technology Officer Mike Schroepfer amongst others. CEO Mark Zuckerberg will likely not be called to the stand this time around. His legal testimonies will probably remain before Congress, wrapped in the realms of international espionage and data rights rather than dry taxation discrepancies. After all, to a company like Facebook or a guy like Zuck, what is $9 billion but a temporary fluctuation?
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