The US Internal Revenue Service is having a look at Facebook’s moves to transfer various rights associated with its worldwide business to a holding company in Ireland.
The US Justice Department filed a lawsuit to enforce summonses served on Facebook and to force the world’s largest social network to produce various documents as part of the probe.
The lawsuit said the documents relate to an IRS examination of the company’s tax liability for 2010, when Facebook’s tax return reported royalty income from transfers of intangible property to Facebook Ireland Holdings Unlimited.
Of course Facebook says it complies with all applicable rules and regulations in the countries where it operates. However, it is just that the Tax authorities have not got their heads around the whole globalisation thing, meaning that big multi-nationals have a habit of hiding out in tax havens leaving their own governments coming up short.
It stuffs up the whole “trickle down” effect of neo-liberalism because the money stays off-shore and is not sued to help social programmes for the poor.
Facebook transferred to the Irish company rights associated with its worldwide business, with the exception of the United States and Canada, the lawsuit said.
Facebook reduces its tax bill by having non-U.S. clients pay advertising fees directly to an Irish subsidiary called Facebook Ireland Ltd.
This subsidiary reported revenues of 4.8 billion euros in 2014, the last year. But Facebook Ireland Ltd reports low taxable profit, of just 13 million euros in 2014, because it pays a significant chunk of its revenue to another Irish-registered company called Facebook Ireland Holdings, in return for the use of the Facebook platform.