Wednesday 17 October 2018

Facebook claims that US taxman is denying it right of appeal in probe

Facebook has denied any wrongdoing and continues to fight the case. Stock photo
Facebook has denied any wrongdoing and continues to fight the case. Stock photo
Mark Zuckerberg
Donal O'Donovan

Donal O'Donovan

Facebook has claimed that US tax authorities are unjustly denying it a right of appeal, against a decision stemming from a 2011 audit of the social network's 2008 to 2010 taxes, including the treatment of assets in Ireland.

Facebook's fight against the Internal Revenue Service (IRS) now six-year-old audit returned to a federal court in San Franciso on Wednesday, where the company's demanding an independent review of its tax bill, and accused tax authorities of illegally denying it access to an appeals forum.

The IRS previously said Facebook may have understated the value of intellectual property it transferred to Ireland by "billions of dollars", unfairly cutting its tax bill in the process, according to court papers.

Last year, US Justice Department filed a lawsuit seeking to enforce IRS summonses served on Facebook and to force the world's largest social network to produce various documents as part of the probe.

The tax authority is examining whether Facebook understated its US income by selling rights to an Irish subsidiary too cheaply.

Facebook has denied any wrongdoing and continues to fight the case.

Facebook is seeking a court declaration that it was denied its appeal rights and an injunction compelling the IRS to give the tech giant independent review.

The complex tax structuring used by big technology companies such as Apple, Google and Facebook is now in focus on both sides of the Atlantic, including intense scrutiny from the European Commission, which is pushing a so-called digital turnover tax that would levy technology firms based on where they make sales, rather than where profits are booked.

In Brussels yesterday, California's governor Jerry Brown said he did not know how a digital turnover tax on internet companies, such as the one the EU is considering, would "work".

On a two-day visit to the EU capital, he also refused to criticise the tax policies of Silicon Valley companies such as such as Facebook and Alphabet subsidiary Google, despite numerous EU member states insisting they do not pay their fair share of tax.

Ireland, which is the European base for many of the firms, does not support the turnover tax plans.

Criticism increased in recent days after revelations in the Paradise Papers that Apple moved billions of dollars to the offshore financial centre on the island of Jersey in order to avoid paying tax in the EU.

"These are my constituents," Mr Brown told Bloomberg Tax in an interview.

"I am not in a position to say anything on this issue."

He also said the issue of Silicon Valley company tax policies had not been raised during visits to the European Commission and the European Parliament on November 8.

On Wednesday, European Competition Commissioner Margrethe Vestager announced she is reopening the tax probe into Apple and accused US tech companies, including Google and Facebook, of pursuing policies she claims are driven by "greed". (Additional reporting Bloomberg)

Irish Independent

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