I wonder if Facebook really did get this wrong

This is actually a simple argument:

Facebook could be liable to pay between $3 to $5bn in extra US tax after an extensive investigation by the US Internal Revenue Service (IRS) into the way the tech company transferred assets to Ireland.

The tax agency has been exploring whether Facebook deliberately deployed complex financial processes designed to minimize the amount of US tax it paid.

And it’s not that one either but then who expects The Guardian to get this stuff right?

Facebook transferred the international rights to exploit its IP offshore in 2010.

This is legal and not complex. The question is, what price?

For that IP must be transferred at market value. Uncle Sam gets tax on that transfer value, obviously.

So, what was the value of Facebook’s international IP in 2010? Opinions will differ, obviously. Private company although one with limited share transactions on Second Market. Total valuation that year anything between $10 billion and $50 billion. How much of that accrues to solely the foreign rights to the IP?

Piece of string?

But it would be fascinating to see that they’d got that valuation hugely wrong.

8 thoughts on “I wonder if Facebook really did get this wrong”

  1. Federal tax rate is 35%? Therefore the IRS are alleging undervaluation by $8.5bn to some $14bn?

    Which, if you assume (bucket figures) that outside US & Canada represented 1/2 of Facebook advertising revenue (more users but much lower monetisation back in the day) somewhere around an (endlessly, with lots of tax lawyers) arguable point.

    I’d note that I haven’t looked up how much Facebook actually valued the transfer at.

  2. In the old days, merchants were given a leg-up by the government on the condition that once attained, their power, wealth and influence would be at the disposal of the state.

    And what does the modern State need?

    Energy and data.

    The difference between Abramovich and Zuckerberg is that one knows he is dancing with the devil, and the other is a clueless kid.

  3. Don’t you think that this high property price; low wage; low tax economy has run its course?

  4. Bloke in Costa Rica

    SE: nothing. DBC Retard’s medicine starts wearing off in the afternoon and then off he goes. He’s like Father Jack: “Feck! Drink! Land Value Tax!”

  5. “Don’t you think that this high property price; low wage; low tax economy has run its course?”

    Low wages, relative to who? China? India? Venezuela? Syria? Somalia? Why are the huddled masses of the world risking their lives attempting to get to this low wage hell hole then?

    Or could it be that life on the lowest level of wages/benefits in the UK is still a far higher standard of living than maybe 80% of the worlds population enjoy?

    Could it be that DBC Reed wants the UK to enjoy the sort of wealth superiority over the rest of the world it did back in his golden era of the 50s and 60s? You know, put those uppity foreigners back in their place, right at the bottom of the pile?

  6. He’s having a laugh with “low tax” too, given that the public sector spends nearly 45% of UK GDP.

  7. “Low wage”? LOL
    The current minimum wage per HOUR is more than I was paid per WEEK when I started work. Inflation accounts for most of the difference but far from all of it and I assume that I was top-quartile, not bottom-decile, for my age-group.

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