The manner in which some of Facebook's assets were valued by a third-party company was "problematic" according to court documents filed by the IRS: Those assets may have been undervalued by "billions of dollars," the agency claims. Facebook just told its investors the bad news, which arrives weeks after investigators asked a California judge to order Facebook to turn over business records from 2010.
That's the year, the Washington Post recalls, that the social network transferred many of its "intangible" assets — corporate intellectual property not held in the US or Canada — to an Irish Holding Company. Companies in Ireland takes advantage of the country's 12.5 percent corporate tax rate, more favorable than the 35 percent rate in the US. Facebook's tax maneuver put it in good corporate company, and the social network apparently hopes to take its effective tax rate to 27 percent this year (from 40 percent last year). But the way that another party, Ernst & Young, valued the assets is what's being called into question according to Consumerist.
Just last week Facebook beat Wall Street Predictions with its quarterly earning and revenue reports. But if the IRS was determined to be correct, Facebook writes in a filing that the results "could have a material adverse impact on our financial position."
This IRS filing also comes just a week after Nobel Laureate Joseph Stiglitz was loudly calling bullshit on a similar practice by Apple, in which he says that roughly $215 billion of the company's $232 billion in cash is being kept in off-shore accounts, including some in Ireland, and that this amounts to fraud.
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