Facebook on the ropes: now it has to pay the bill

For ten years Facebook has enjoyed an extremely favorable tax regime, thanks to a holding company based in Ireland, but the American Internal Revenue Service has said enough.

How much tax does Facebook pay in the world? Very little, compared to what it collects. How does it do it? Thanks to Facebook Ireland Holdings Unlimited, Facebook International Holdings Unlimited I and Facebook International Holdings Unlimited II, the three companies under Irish law in whose coffers ends most of the turnover of the group of Mark Zuckerberg.

But the party, it seems, is over and Facebook is already preparing the boxes for the move: back home, in the United States, from where arrived a heavy subpoena from the U.S. Internal Revenue Service (IRS). In practice, the U.S. Internal Revenue Service. According to the IRS, Facebook, thanks to its Irish companies, has not paid taxes for ten years and now must transfer everything to the motherland to avoid legal consequences. For the years already passed, moreover, the IRS is asking for a hefty bill.

Facebook and the Irish companies

According to the accounts made by the Times and the Guardian in 2018, the last year for which Facebook's financial statements are publicly available, Facebook's Irish subsidiary paid just 101 million dollars in taxes on 15 billion in profits thanks to an extremely advantageous tax regime.

In fact, for several years now, Ireland has been almost a tax haven, especially for tech companies. It's enough to set up the legal headquarters in the country to pay very little for huge profits. Facebook, however, has done even more and for this reason has ended up under the lens of the Internal Revenue Service.

Facebook's intellectual property

The IRS blames Facebook for having transferred to the Irish holding company the intellectual property and patents related to social and apps of the whole group. All of Facebook's domestic companies, which manage the group's operations in the various countries where it has a presence, pay the Irish holding company for the use of intellectual property.

Facebook, in effect, pays itself so it can pay taxes in Ireland. Few taxes, too few according to the American IRS that has asked for a bill of 9 billion to Zuckerberg and associates.

Hence the decision, apparently already put into practice, to bring the intellectual property back to America and to go back to paying taxes in the United States from next year. Paying little tax in Ireland but a lot of fines in the U.S., on the other hand, wouldn't make sense.

Facebook justifies the decision by talking about "recent and upcoming changes in tax law that policymakers are supporting around the world" and says it has best aligned the corporate structure "with where we expect to have most of our activities and people."

According to a recent report from Mediobanca's research center, under this system, Facebook paid taxes in Italy in 2019 of just €2.3 million.