Facebook will shut down Irish Holding firms as a tax feud arises
Intellectual assets will be moved to the US following US claim that it had a tax debt of $9bn.
Facebook will close down Irish holding firms it used to move billions of profits to evade tax payments in the UK, US, and a significant number of other states.
The firm’s critical Irish associate paid tax amounting to $101m (£ 75m). In the year 2018, records indicate it paid profits exceeding $15bn. Facebook firms throughout the globe paid the Irish holding firm to access its intellectual asset.
In 2018, Facebook International Holdings I Unlimited Company noted $30bn income, over 50% of Facebook’s $56bn overall worldwide turnovers.
The firm’s resolve to shut down the Irish divisions and give back its intellectual asset to the US happened soon after the US Internal Revenue Service (IRS) sued the firm, alleging it had over $9bn debt, which had something to do with its decision to move its revenue to Ireland in 2010. In 2012 before its stock market flotation, Facebook took stock of its intangible assets, and in 2010, its value was $6.5bn. However, the IRS stated that $2.1bn was the real value.
The Irish Companies Registration Office noted the resolve to shut down three of Facebook’s Irish holding firms. ‘The Times’ published it first.
Facebook issued a statement saying that the Irish holding firm ‘was shut down as one of the changes that suit our operating method.’ In preparation for the unlimited company’s closure, Facebook Ireland Holding’s properties were moved to its parent company in the US.
‘Intellectual property licenses connected to our global activities have been returned to the US. We think it works well with the latest and impending tax regulation changes that policymakers are backing globally.’
According to Facebook, its active tax rate in the last five years surpassed 20%. The Organization for Economic Co-operation and Development indicated that this matches the worldwide average of 23%. In December 2019, the firm’s results revealed that its effective tax rate increased to 25% from 13% at the end of 2018.
Last year Facebook paid the UK tax amounting to only $28.6m, although it recorded gross revenue of £2.2bn from advertisers, revealed Companies House accounts filed this month. The previous year, tax payment increased by a meager £100,000 although the profits rose by more than 1/4.
The Labour MP, Margaret Hodge, and the parliamentary group on responsible taxation chair stated that the small tax payment ‘is unbelievable.’
‘Big tech has prospered even though other firms have strained during the pandemic, because an increasing number of individuals spend a significant amount of time online,’ she stated.
In January, Google returned its intellectual asset holdings to the US before the closure of the ‘double Irish’ tax gap. US firms have used this to move global income through Ireland to tax refuges like Bermuda, storing them away from the US. Five years ago, Ireland conceded to stop the move after worldwide pressure. However, firms were given a deadline of the end of 2020.