IRS sues Facebook for $9 billion in unpaid taxes

Five Facebook Executives will testify in the trial that might last for three to four weeks.

According to Reuters, the US Internal Revenue Service (IRS) has fined social media giant Facebook in unpaid taxes. It claimed that Facebook underestimated the intellectual property it sold to the subsidiary, thereby evading billions in taxes.

IRS sues Facebook for $9 billion in unpaid taxes

The IRS has filed the lawsuit in a San Francisco court. The filing statement by the revenue service was: “Facebook undervalued the royalty amount between 2010 and 2016, which cut the company’s domestic tax bill as the royalties are ultimately reported as income”.

The myriad of tech firms has known to save billions from taxes by putting their money in Ireland as the country has low corporate tax rates. Back in 2016, the European Union (EU) ordered Apple to pay $15.4 billion in back taxes to Ireland, while in September, Google said it would pay more than $1 billion after a French investigation into its tax practices.

The social media giant told the court that it valued only $6.5 billion in 2010. Here, the IRS begged to differ, saying the social media giant “knowingly undervalued itself while selling off its intellectual property to a new company based in Ireland to avoid paying US corporation tax”.

Facebook told the court that it valued only $6.5 billion in 2010 but the IRS begged to differ, saying the social media giant “knowingly undervalued itself while selling off its intellectual property to a new company based in Ireland to avoid paying US corporation tax”. Moreover, Facebook alleged that the IRS’ valuation was based on a “2020 perspective and not a 2010 perspective”.

Facebook supposedly sold the rights to its software and trademarks to a subsidiary based in Ireland and that company pays the social media giant in the US “royalties. This granted Facebook to pay an Irish tax rate of 12.5% rather than the 35% corporate tax rate in the US, which is since reduced to 21%.

Facebook Chief Technology Officer Mike Schroepfer, AR and VR chief Andrew Bosworth, and three other Facebook executives will be in the court to testify. The trial is expected to last three to four weeks.


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