Intellectual property to be repatriated to the United States after $9 billion in tax liability has been discovered by the IRS
In order to stop paying taxes in the U.S., UK, Facebook wound up Irish holding companies from which it funneled billions in profits. The largest Irish subsidiary of the group charged $101 million (£75 million) in taxes, thus announcing income in 2018 of more than $15 billion, the latest year for which records are available. The Irish holding company was compensated by Facebook companies around the world for the use of their intellectual property. In 2018, Facebook International Holdings I Unlimited Company reported $30 billion in sales, more than half of Facebook’s overall global revenue of $56 billion. The decision by the corporation to close its Irish divisions and return its intellectual property to the United States came shortly after the United States. The corporation was brought to court by the Internal Revenue Service (IRS), saying it owes more than $9 billion due to its 2010 decision to transfer its income to Ireland.
Facebook estimated its intangible assets at $6.5 billion in 2010, before going public in 2012, but the IRS reported the true value was $21 billion. The Irish Companies Registration Office registered the decision to dissolve three of Facebook’s Irish holding companies.
Facebook said in a statement that “as part of a change that best aligns with our operating structure, the Irish holding company has been dissolved.”
“The assets of Facebook Ireland Holdings were distributed to the U.S. parent company in preparation for the dissolution of the unlimited liability company. Facebook will convert U.K. users to U.S. terms to circumvent EU privacy laws. Read more “Intellectual property licenses related to our foreign activities have been repatriated to the U.S. We agree that this is compatible with recent and forthcoming tax law reforms proposed by policymakers around the world. According to the Paris-based Organization for International Cooperation and Development, Facebook said its effective tax rate has been above 20 percent for the past five years, which is the global average of 23 percent.’
According to the company’s figures, the effective tax rate increased from 13 percent at the end of 2018 to 25 percent in December 2019. Facebook charged only £ 28.6 million in tax in the UK last year, while it reported £ 2.2 billion in gross revenue from advertisers, according to reports submitted this month at Companies House. Margaret Hodge, a Labor MP and member of the Answer Parliamentary Committee “While other companies have struggled during the pandemic, Big Tech has thrived as people spend more and more time online,” she said. “In January, Google moved its intellectual property holdings from Ireland back to the U.S., before closing the “double Irish” tax loophole used by U.S. corporations to funnel foreign profits through Ireland and on to tax havens such as Bermuda to keep them outside the U.S. “Facebook and the rest of the tech giants must do their moral duty and pay their fair share.”
Five years ago, under international pressure, Ireland agreed to close the scheme, but businesses were granted until the end of 2020 to comply.