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Image credit: Reuters/Stephen Lam

Facebook says it shouldn't pay back taxes from Irish loophole

It claims the IRS made a mistake.
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Reuters/Stephen Lam

Apple and Google aren't the only big tech companies fighting against requests to pay back taxes they allegedly racked up through loopholes. Filings obtained by Ars Technica show that Facebook is resisting the IRS' request for taxes owed after the social network reportedly undervalued property transferred to its Irish holding company. If you ask the US agency, Facebook owes $1.7 million plus interest for at least 2010. That doesn't sound like much for such a profitable company, but Facebook claims that it could wind up paying $3 billion to $5 billion (before interest and penalties) if the IRS really does want money from the past several years.

If you ask Facebook, the IRS hasn't even settled the matter of how much that property transfer was worth. It's still "in dispute," the company says. Not that the agency is likely to show much sympathy, as it has repeatedly fought with Facebook over the auditing process. The IRS maintains that Facebook didn't produce all the data it needed for an audit and didn't show up to meet auditors, while Facebook insists that it bent over backwards to supply info and make staff available.

Companies won't get to use the loopholes in question after 2019 thanks to changes in Irish law, so Facebook may not run into a tax dispute like this again. However, it's doubtful that Zuckerberg and crew will take much solace in that fact. The whole point of the Irish presence was to minimize taxes -- it's reasonable to say that Facebook will fight tooth and nail to preserve the benefits of its creative accounting.

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