In particular, the IRS claims that Facebook has understated the value of the intellectual property it sold to an Irish subsidiary back in 2010 when the now world’s largest social media platform was seeking to expand internationally. The arrangement involved the subsidiary paying royalties to Facebook’s Stateside parent entity in order to use its trademark, access its users, and also its inventory of technologies. The court filings indicate that over the course of six years between 2010 and 2016, the Irish subsidiary paid more than $14 billion USD in royalties.
In response to the lawsuit, which Facebook estimates will take three to four weeks, Mark Zuckerberg’s company contends that “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’s spokeswoman Bertie Thomson also commented that Facebook stands by the decision it made back in 2010 when it “had no mobile advertising revenue, its international business was nascent and its digital advertising products were unproven.”
If the court finds Facebook liable for tax evasion, the social media platform will face a fine of up to $9 billion USD plus interest and any other penalties imposed by the court.