8 ms·

To those mentioning that Facebook's revenue is $70b: their net income is only around ~$18b. This would be half of Facebook's net income for an entire year, whi

by alehul 7y ago

To those mentioning that Facebook's revenue is $70b: their net income is only around ~$18b. This would be half of Facebook's net income for an entire year, which is substantial. It's a big deal to them.

bryanrasmussen 7y ago
yes but it's my experience that revenue can be played with to determine the net income you find preferable, generally for tax purposes.
- bilekas 7y ago
  This happens more frequently than outright evasion.
akerro 7y ago
That's what the point of punishing companies for hiding money in tax heavens is. If they got fined $10M it wouldn't be much newsworthy
- Hamuko 7y ago
  Making someone pay the taxes they owe is not a punishment.
  - mam2 7y ago
    making them pay for the crime is though
  - mech1234 7y ago
    I doubt facebook committed a crime here. The right way to address tax avoidance is to change the law, not to punish companies that comply with the law through arbitrary levels of complexity. Even if everyone in the room is aware that facebook is practicing avoidance, avoidance is still legal and categorically different than evasion. Now- The right way to figure out whether this was a crime seems to be by examining the fair value of the intellectual property sold to Facebook's Irish subsidiary. I hope the discussion here can center around this.
    - saalweachter 7y ago
      Legal precedent is a portion of the law. You -- or in this case, Facebook -- has one interpretation of what is legal, the enforcement agency has another. The court decides and everyone goes forward from there. You and I can have opinion on whether these various international schemes are legal ways to avoid taxes, but ultimately the law going forward will be the precedent set by this case, and its appeals.
      - ksec 7y ago
        There is nothing in the case suggest the international schemes are illegal. Even the IRS is not trying to push for that. "The IRS argues that Facebook understated the value of the intellectual property it sold to an Irish subsidiary in 2010 while building out global operations" That is what IRS is trying to sue, on the ground that Facebook Ireland is now collecting substantially large revenue compare to what it was priced. To me, trying to compare 2010 Facebook patents cost on revenue generated in 2020 is simply absurd. Patents are per user an per revenue based. Facebook 2020 is way bigger than Facebook 2010.
        ska 7y ago
        You latter point doesn't really make sense to me. Isn't it true that a sale of IP should model the value of the IP over its lifetime in some reasonable way? And that would include a growth model for FB, no? If it could be shown that facebook intentionally undervalued it in order to make this scheme work better for them, wouldn't the IRS have a case?
        ksec 7y ago
        >Isn't it true that a sale of IP should model the value of the IP over its lifetime in some reasonable way? There aren't any "correct" way to measure it, but most of these IP are likely on percentage based. Sort of like 5G patents where they collect percentage of revenue. So the value I guess they did in 2010 were calculated based on ( projected ) 2012 ( its IPO ) figure. I think judging by majority of comment most people forgot how Facebook perform after its IPO, how its growth wasn't there, how Facebook Gaming Saved it, and how Mobile Internet ( aka Smartphone ) really took off, how they went to Mobile ( App ) First before the term was hyped by SV, and how it has grown possibly beyond most people would imagine. And that is not just Facebook itself, but also Instagram. That is why I said comparing the value in absolute terms and not on relative terms doesn't make any sense. At least that is judging from the limited amount of information given out by this FoxBusiness article. So again lots of assumption involved.
  - deleted 7y ago
    [deleted]
bilekas 7y ago
Not exactly, it's not a good measure simply to take the profit of 1 year as a guide. They will not be expected to pay this fine each year. Turning over a profit of 9Bn, its still after this fine.. Thats still huge. Given their assets, cash on hand etc. I don't think they will lose much sleep. Anyway they will get away with it. They can afford to.
- kd0amg 7y ago
  They will not be expected to pay this fine each year. They will be "expected" to discontinue the behavior the IRS is suing them for. If they do it again, the IRS presumably has cause to sue again.
  - harryh 7y ago
    The lawsuit is not about ongoing behavior, but about the valuation placed on a one time intellectual property sale in 2010.
  - bilekas 7y ago
    Don't worry, they fine wont stand. - Get used to be screwed over by companies with more power in the law than you.
saiya-jin 7y ago
Well it should be. There are public services not being provided/underfunded because of those unpaid taxes. Considering main revenue stream of FB, there is hardly anybody here being sad about this. In a similar vein when a rogue multinational bank is fined up to a yearly profit for some dirty shit, and people celebrate.
- Mirioron 7y ago
  Facebook might have decided to simply do less business, because the risk wasn't acceptable with the taxes added. When the cost of doing business is higher then less business is done.
throwaway_tech 7y ago
It should be noted the unpaid taxes are from the period of 2010-2016. >“Facebook Ireland and Facebook’s other foreign affiliates - not Facebook US - led the high-risk, and ultimately successful, international effort to sell Facebook ads,” the company said in a pre-trial memorandum. What a fraud.
- deleted 7y ago
  [deleted]
isoskeles 7y ago
To those mentioning Facebook's income is only around ~$18b, they're sitting on ~$55b in cash and short-term investments. If they had to, they could scrounge up the $9b.

by alehul 7y ago

bryanrasmussen 7y ago

yes but it's my experience that revenue can be played with to determine the net income you find preferable, generally for tax purposes.

bilekas 7y ago
This happens more frequently than outright evasion.

akerro 7y ago

That's what the point of punishing companies for hiding money in tax heavens is. If they got fined $10M it wouldn't be much newsworthy

Hamuko 7y ago
Making someone pay the taxes they owe is not a punishment.
- mam2 7y ago
  making them pay for the crime is though
- mech1234 7y ago
  I doubt facebook committed a crime here. The right way to address tax avoidance is to change the law, not to punish companies that comply with the law through arbitrary levels of complexity. Even if everyone in the room is aware that facebook is practicing avoidance, avoidance is still legal and categorically different than evasion. Now- The right way to figure out whether this was a crime seems to be by examining the fair value of the intellectual property sold to Facebook's Irish subsidiary. I hope the discussion here can center around this.
  - saalweachter 7y ago
    Legal precedent is a portion of the law. You -- or in this case, Facebook -- has one interpretation of what is legal, the enforcement agency has another. The court decides and everyone goes forward from there. You and I can have opinion on whether these various international schemes are legal ways to avoid taxes, but ultimately the law going forward will be the precedent set by this case, and its appeals.
    - ksec 7y ago
      There is nothing in the case suggest the international schemes are illegal. Even the IRS is not trying to push for that. "The IRS argues that Facebook understated the value of the intellectual property it sold to an Irish subsidiary in 2010 while building out global operations" That is what IRS is trying to sue, on the ground that Facebook Ireland is now collecting substantially large revenue compare to what it was priced. To me, trying to compare 2010 Facebook patents cost on revenue generated in 2020 is simply absurd. Patents are per user an per revenue based. Facebook 2020 is way bigger than Facebook 2010.
      - ska 7y ago
        You latter point doesn't really make sense to me. Isn't it true that a sale of IP should model the value of the IP over its lifetime in some reasonable way? And that would include a growth model for FB, no? If it could be shown that facebook intentionally undervalued it in order to make this scheme work better for them, wouldn't the IRS have a case?
        ksec 7y ago
        >Isn't it true that a sale of IP should model the value of the IP over its lifetime in some reasonable way? There aren't any "correct" way to measure it, but most of these IP are likely on percentage based. Sort of like 5G patents where they collect percentage of revenue. So the value I guess they did in 2010 were calculated based on ( projected ) 2012 ( its IPO ) figure. I think judging by majority of comment most people forgot how Facebook perform after its IPO, how its growth wasn't there, how Facebook Gaming Saved it, and how Mobile Internet ( aka Smartphone ) really took off, how they went to Mobile ( App ) First before the term was hyped by SV, and how it has grown possibly beyond most people would imagine. And that is not just Facebook itself, but also Instagram. That is why I said comparing the value in absolute terms and not on relative terms doesn't make any sense. At least that is judging from the limited amount of information given out by this FoxBusiness article. So again lots of assumption involved.
- deleted 7y ago
  [deleted]

bilekas 7y ago

Not exactly, it's not a good measure simply to take the profit of 1 year as a guide. They will not be expected to pay this fine each year. Turning over a profit of 9Bn, its still after this fine.. Thats still huge. Given their assets, cash on hand etc. I don't think they will lose much sleep. Anyway they will get away with it. They can afford to.

kd0amg 7y ago
They will not be expected to pay this fine each year. They will be "expected" to discontinue the behavior the IRS is suing them for. If they do it again, the IRS presumably has cause to sue again.
- harryh 7y ago
  The lawsuit is not about ongoing behavior, but about the valuation placed on a one time intellectual property sale in 2010.
- bilekas 7y ago
  Don't worry, they fine wont stand. - Get used to be screwed over by companies with more power in the law than you.

saiya-jin 7y ago

Well it should be. There are public services not being provided/underfunded because of those unpaid taxes. Considering main revenue stream of FB, there is hardly anybody here being sad about this. In a similar vein when a rogue multinational bank is fined up to a yearly profit for some dirty shit, and people celebrate.

Mirioron 7y ago
Facebook might have decided to simply do less business, because the risk wasn't acceptable with the taxes added. When the cost of doing business is higher then less business is done.

throwaway_tech 7y ago

It should be noted the unpaid taxes are from the period of 2010-2016. >“Facebook Ireland and Facebook’s other foreign affiliates - not Facebook US - led the high-risk, and ultimately successful, international effort to sell Facebook ads,” the company said in a pre-trial memorandum. What a fraud.

deleted 7y ago
[deleted]

isoskeles 7y ago

To those mentioning Facebook's income is only around ~$18b, they're sitting on ~$55b in cash and short-term investments. If they had to, they could scrounge up the $9b.