The US Internal Revenue Service (IRS) is suing Facebook for $9 billion in unpaid taxes, reports The Verge via Reuters.
This new lawsuit has gone to trial in a San Francisco court. The social network is under the microscope for a deal it made in 2010 with an Irish subsidiary that it uses to send money about internationally. The IRS alleges that Facebook has undervalued the intellectual property it sold to the subsidiary in question and therefore dodged billions in taxes.
Called to testify were Facebook CTO, Mark Schroepfer and AR and VR chief, Andrew Bosworth. Three other Facebook execs are expected to testify, the trial is expected to last three to four weeks.
It isn’t uncommon for tech giants to shelter billions from taxes by storing money in Ireland as the country has a low corporate tax rate. Companies will create Irish subsidiaries that license out proprietary technology, trademarks, and other company property for which royalties are paid by the subsidiary.
In recent years, government entities around the world have begun taking action against this practice. In 2016, the EU ordered Apple to pay $15.4 billion in taxes back to Ireland after finding that the company had received illegal tax benefits. Apple had paid back all the taxes by 2018, though the decision was later appealed in court between it and Ireland.
In September, a French investigation found that Google had to pay more than $1 billion in taxes. Google has since said it would stop taking advantage of this loophole, so-called the “Double Irish” loophole, which allowed it to move overseas funds and effectively shelter it from taxes.
Facebook undervalued the royalty amount between 2010 and 2016 which massively decreased the company’s domestic tax bill, claims the IRS.
Facebook says that it stands behind the 2010 transaction, which was during a period when the company had no mobile ad revenue, a “nascent” international business and its “digital advertising products were unproven” via Berti Thomson speaking to The Verge.
Edited by Luis Monzon
Follow Luis Monzon on Twitter
Follow IT News Africa on Twitter
