Facebook owes to US Government IRS $5 Billion in federal taxes via profit shifting

Facebook will most likely have to pay over $5 billion in federal taxes. According to sources, the company had received a statutory notice of deficiency from the IRS in a Securities and Exchange Commission filing on Thursday.

Even though the recent notice only applies to 2010 fiscal year, the agency will put a tab on other tax years of Facebook. Despite $3 billion federal income tax bill, the Monet Carlo-based company has to pay $5 billion towards interest and penalities.

Responding to media queries, an official Facebook spokesperson revealed that the company doesn’t agree with the notice of the IRS. The company’s legeal department will soon file an appeal in the United States Tax Court challenging the notice.

If they have to pay the amount as claimed by the IRS, then it will put the company’s financial position in serious danger. It will have adverse impact on our overall financial position, which includes operations results and cash flows.

The main problem related to the recent penalty imposed by IRS is the way in which Facebook shifted assets to its Ireland subsidiary. According to regulators, the Ernst & Young has grossly undervalued the assets assets during transfer. This has caused huge losses to states exchequer.

Responding to media queries, an official spokesperson claried that Facebook did complies with all the applicable rules and regulations of the respective countries. Meanwhile, IRS declined to comment any further information about the issued notice.

It is common for the companies in the US to park profits and intellectual property abroad to avoid 35 percent corporate tax imposed by the US government. According to a study conducted by Reed College, the companies based in the US will avoid up to $135 billion in corporate taxes in 2016 as part of profit shifting.

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Anand Narayanaswamy is the editor-in-chief of Netans. He was recognized as a Microsoft Most Valuable Professional (MVP) for 9 years (2002 to 2011) and currently part of MVP Reconnect program. He is also part of the prestigious ASPInsider program. Anand has published several articles and reviews related to various software and hardware products for various software and technology related websites. He is also active on social media and also participates as an Influencer for various brands. Anand can be reached at admin@netans.com