Who's Afraid of the IRS? Not Facebook. (propublica.org) 63
Speaking of tax evasions, Kiel, in a separate story at ProPublica this week: In March 2008, as Facebook was speeding toward 100 million users and emerging as the next big tech company, it announced an important hire. Sheryl Sandberg was leaving Google to become Facebook's chief operating officer. CEO Mark Zuckerberg, then 23 years old, told The New York Times that Sandberg would take the young company "to the next level." Based on her time at Google, Sandberg soon decided that one area where Facebook was behind its peers was in its tax dodging. "My experience is that by not having a European center and running everything through the US, it is very costly in terms of taxes," she wrote other executives in an April 2008 email, which hasn't been previously reported. Facebook's head of tax agreed, replying that the company needed to find "a low taxed jurisdiction to park profits." Later that year, Facebook named Dublin as its international headquarters, just as Google had done when Sandberg was there. And just like Google, Facebook concocted an intra-company deal to "park profits" in Ireland, where it would pay a tax rate near zero.
Like its Big Tech peers, Facebook wasn't much afraid of the IRS. But, as it happened, the same year that Facebook started moving profits to Ireland, the IRS launched a team to crack down on deals like that. The effort started aggressively. As we recently reported, the IRS threw everything it had at Microsoft in the largest audit in the agency's history. But shortly after the IRS showed this new ambition, Republicans in Congress, after taking the House in 2010, began forcing cuts to the IRS' budget. Over the years, as Facebook grew into one of the world's largest companies, with 2 billion users, the IRS was shrinking. By the time the IRS finally took on Facebook over its Irish deal a few years later, the agency was in over its head. ProPublica pieced together the story of the Facebook audit from court documents filed by the two sides in their yearslong battle. The picture revealed by the documents provides a crucial window into the IRS' struggles to check large corporations' tax schemes.
Like its Big Tech peers, Facebook wasn't much afraid of the IRS. But, as it happened, the same year that Facebook started moving profits to Ireland, the IRS launched a team to crack down on deals like that. The effort started aggressively. As we recently reported, the IRS threw everything it had at Microsoft in the largest audit in the agency's history. But shortly after the IRS showed this new ambition, Republicans in Congress, after taking the House in 2010, began forcing cuts to the IRS' budget. Over the years, as Facebook grew into one of the world's largest companies, with 2 billion users, the IRS was shrinking. By the time the IRS finally took on Facebook over its Irish deal a few years later, the agency was in over its head. ProPublica pieced together the story of the Facebook audit from court documents filed by the two sides in their yearslong battle. The picture revealed by the documents provides a crucial window into the IRS' struggles to check large corporations' tax schemes.
Nobody's afraid of the IRS (Score:3, Interesting)
Re:Nobody's afraid of the IRS (Score:4)
Re:Nobody's afraid of the IRS (Score:4, Interesting)
It's not that simple. Right now the situation is: you made X. You spent Y, Your profit is Z minus licensing fees paid to some company in Ireland.
There are legitimate reasons that could happen. For instance the company can be running on software it is licensing from someone else or is reselling licenses owned by someone else.
The problem is when companies internally sell their software to a subsidiary that is located in a tax haven to reduce their tax load. The only way to stop this is to audit the means by which the software ended up in the tax haven, but the IRS can't do that if it's enforcement budget has been cut.
Microsoft has a wee bit more power than you (Score:2)
I'm not saying we give up, but if you're playing a rigged game and don't acknowledge it's rigged you're gonna lose.
Re: Nobody's afraid of the IRS (Score:1)
In Soviet America, we tax the poor to subsidize the rich!!
Re: (Score:2)
Well, it isn't like this hasn't been seen before. We was the IRS targeted at groups during the Obama administration.
Re: (Score:1)
Facebook gets shit because Facebook sucks the most. There are lots of people who like Apple or Google; those companies have both (at times) produced useful things even if you don't think they're very good. Facebook, OTOH, has always been a completely worthless parasite.
If it's not illegal, then it's legal (Score:4, Insightful)
Like it or not, but it is the responsibility of well-run companies to use all legal means to pay as little taxes as possible. If it's not illegal, then that necessarily implies that it's legal. It would make no sense for a company to not use all legal means to reduce taxes to as little as possible, right?
If loopholes exist in the tax code, then Congress can pass new laws to close those loopholes. And then when that legislation is passed, they should fully expect all companies to read those changes to the taxes and continue to use all legal means to pay as little tax as possible.
Taxes don't help a company grow, offer new products or services. Taxes paid to the government takes money that the company can use or pay to shareholders and removes it from the table. Therefore, if there is a legal means to avoid taxes, companies must take it (whether politicians like it or not).
Re:If it's not illegal, then it's legal (Score:5, Insightful)
Taxes don't help a company grow, offer new products or services. Taxes paid to the government takes money that the company can use or pay to shareholders and removes it from the table. Therefore, if there is a legal means to avoid taxes, companies must take it (whether politicians like it or not).
Actually taxes do help a company grow. It would be much harder for a company to grow if it they had to build all their own roads to get their good to and from market (just as one example).
Re: If it's not illegal, then it's legal (Score:2)
Roads are largely paid for by taxes on fossil fuels, not corporate income taxes. Communities build roads to entice companies, and the tax revenue they provide police/fire departments, public works, etc.
Re: (Score:2)
I hate to tell you this but gas tax is still a tax. The quote I cited says "taxes don't help a company grow". It doesn't single out income tax. I would also point out that in most cases the gas taxes just go into general revenue then general revenue is used for infrastructure expenditures.
Yes I realize the subject of this thread deals with the IRS but corporate taxes also (for the most part) go into general revenue so some income tax would be used for infrastructure costs.
Re: (Score:2)
Re: (Score:2)
Okay, well that accounts for 5% of taxes paid.
And look how amazing the roads are.
Re: (Score:2)
Not true (Score:2, Insightful)
According to who, exactly?
Re:Not true (Score:5, Insightful)
Like it or not, but it is the responsibility of well-run companies to use all legal means to pay as little taxes as possible.
According to who, exactly?
The lawyers they pay to get the tax code changed and the accountants they pay to hide all that money.
Re: (Score:1)
Like it or not, but it is the responsibility of well-run companies to use all legal means to pay as little taxes as possible.
According to who, exactly?
Shareholders.
Re: (Score:2)
Why do you think companies exist? To make friends and have a cool place to hang out M-F?
Re: (Score:2)
Taxes don't help a company grow, offer new products or services. Taxes paid to the government takes money that the company can use or pay to shareholders and removes it from the table.
Similarly, taxes don't help citizens grow, consume products and service. Taxes paid to the government takes money that the citizen can use or invest and removes it from the table. Yet where are the loopholes for everyday citizens that grant them the ability to pay $0 taxes?
Why should corporations not be treated the same as citizens. There should not be any loopholes available to one party, but not the other.
Re: (Score:3)
Re: (Score:2)
Taxes don't help a company grow, offer new products or services. Taxes paid to the government takes money that the company can use or pay to shareholders and removes it from the table. Therefore, if there is a legal means to avoid taxes, companies must take it (whether politicians like it or not).
This is basically what is wrong with the corporatocracy. What you're saying all makes sense, until you realise that businesses and rich people are now sitting around on so much cash (and I mean literally cash) that they are storing it in bank vaults because they think the entire global economic system is going to implode. Once we got to that point, it was the same as the dude in monopoly who has all the properties and wants to keep playing so he can enjoy impoverishing the rest of the players.
The game is ov
Re: (Score:2)
(and I mean literally cash) that they are storing it in bank vaults because they think the entire global economic system is going to implode
That makes so little sense I'm inclined to believe you have no clue what you are posting about. In any global economic happening worthy of being called an implosion, the bank notes issued by governments would be nearly worthless.
Re: (Score:2)
Like it or not, but it is the responsibility of well-run companies to use all legal means to pay as little taxes as possible.
This is a common misconception, companies don't have any such responsibility. They do have market pressure, and the need to remain competitive may result in the same actions, but there's no responsibility to generate profits.
Regardless, the point of the article is that the IRS has been put in a position where they can't argue legality effectively. Obviously, they took Facebook to court because they believed that Facebook did something illegal. Did Facebook do something illegal? The IRS was not able to pr
Re: (Score:2)
Re: (Score:2)
Nope, Taxes definitely help a company grow. When taxes are higher corporations invest back into the business because it is a tax writeoff. at times of low taxes corporations buy back stock and pay out bonuses.
This is news? (Score:4, Insightful)
Small companies moved between offices to reduce leasing costs.
Medium companies move between states for reduce income tax / property tax expenses.
This is news that large companies move between countries to reduce tax expenses?
Maybe instead of vilifying people for wanting to reduce overhead costs, maybe the US should looks at how much we're driving away businesses with complex and expensive taxes.
Oh. Sorry, forgot the axiom that rich = evil. Cary on with the complaining.
Re: (Score:3)
If a company moves states, it stops using resources that the old state cost money to provide.
The problem in this case, is that the companies are moving on paper only and are still mostly in the original country.
Re: (Score:1)
And how much we're attracting them with good infrastructure and government services!
Re: (Score:2)
I'm not going to to argue what an acceptable tax rate is.. simply that it should be paid where it is made. There are plenty of less "shady" methods of reducing tax burden than setting up an HQ in Ireland. Yeah, won't get it down to zero but
Re: (Score:2)
Hoarding wealth is immoral. So yeah, rich = evil. Even Jesus Christ supposedly said so.
There are only 2 possible reasons you hold this opinion: either you're rich and a selfish fuckwit, or you're poor and a stupid fuckwit.
I fought the law, and the law ... (Score:2)
had their agency defunded.
Screw the IRS .... (Score:3, Interesting)
Seriously .... If they're "way understaffed" to handle a big company like Facebook or Microsoft (who probably amounts to a FAR larger percentage of potential tax revenue than most individuals), maybe they should make it more of a priority to examine them using staff they've got piddling around, randomly auditing taxes of individual filers who don't even earn much money?
It always seemed to me that if you can do your taxes electronically with software like TurboTax and it's able to warn you about how "high a risk" your return is? Then surely, the IRS could use AI and automate a verification of the typical American taxpayer's return too. We probably pay more in taxes to cover the salaries of IRS employees than they recover, when they waste a bunch of time harassing the divorced parent to prove their kid "really lives with them more than 6 months out of each year" to qualify for that $500 or so deduction, or when they want a full audit done because some small business owner claimed a couple thousand bucks in expenses for mileage and they want to see if it really all adds up.
Re: (Score:2)
What's even funnier is that they force me to collect a bunch of information from various sources, collate and store this printed data. And then, after I send them the printed data, they send me a notice saying that I left something out.
If you had the data already, why the hell are you forcing me to become a tax accountant once a year, just so that you can claim a "gotcha" on a math mistake?
I'm convinced our tax system is about bureaucratic control and nothing else.
Re: (Score:3)
Re: (Score:2)
The problem is the IRS leadership decided to spend the agency's time on politically motivated B.S. like slowing down the registration of Tea Party non-profits and unconstitutionally demanding donor lists rather than prioritizing spending funds and staff time on auditing tax cheats. As a result, they lost all sympathy on the right for their additional funding requests, because if they had time and money to screw around politically like that, they obviously had too large of a budget. It's the primary method C
Comment removed (Score:4, Insightful)
Re:why the crackown now? we're broke. (Score:4, Informative)
Even if we canceled all military spending we would still be completely screwed. We spend vastly more on social services then we do defense. Go check a federal spending pie chart.
It's not that military spending is nothing, but canceling military spending wouldn't even provide us a budget surplus, let alone begin to pay down the debt.
So while you drone on about military spending, you really need to look at the whole picture. We need government service cuts across the board, along with a more straight forward tax system that stops letting companies screw the taxpayers over.
None of that will ever happen though. We both know that.
Re: (Score:2)
Theory vs Reality (Score:2)
" If loopholes exist in the tax code, then Congress can pass new laws to close those loopholes. "
Everyone always has the same response " Just get Congress to pass new laws ", which is fucking laughable because companies with enough money basically write the first draft of any new proposed law ensuring some sort of loop-hole will always exist in one form or another.
Short Sighted Thinking (Score:5, Insightful)
One would think folks in Congress would want to maximize revenue. Unfortunately, the Republican Party in general has a knee-jerk hatred of the IRS, and espouses an irrational fear about IRS enforcement officers breaking down grandma's door, guns blazing, because she forgot to carry the one.
There would be a point where the IRS becomes overstaffed, and goes out of its way to harass law-abiding taxpayers. We are a loooong way from that. And in the meantime, the US is being cheated out of a lot of lawful tax revenue by dodgers.
Re: (Score:3)
I'd actually feel bad if so much money was pissed away by the feds. But until they can be responsible, too bad.
Re: (Score:1)
Re: (Score:2)
Re: (Score:1)
It's telling that the best example you can think of comes from the Eisenhower administration. Back when Americans were patriotic and Republicans were in control.
How about those wars, eh? Best use of six trillion dollars ever. And it turned out they've been lying about progress for years. How about another trillion? Think it will turn the tide?
Re: (Score:2)
Actually, it's worse than this. Republicans are not allowed to vote in favor of simpler tax preparation, because of their Grover Norquist pledges:
https://www.npr.org/transcript... [npr.org] (search for Grover)
Plenty of other sources if you search for "Grover Norquist ready return" as well.
Who cares? (Score:3)
If a company follows the tax rules and reduces their taxes by changing their company structure or accounting, then it's fine. There isn't a single person out there that wouldn't try to take advantage of the tax system to decrease their taxes if given the opportunity. That's why we should have a flat tax, instead of all these hoops that everyone has to jump through.
Corporate taxation silly anyway. (Score:2)
It's silly. Just increase the capital gains and income taxes on upper incomes a bit and mostly get rid of corporate taxes. The only taxes they should be paying are local taxes for resource use to state/local for roads, property, utilities, etc...
To make up the difference just tax the people who are profiting from the corporations a bit more. It's much easier to accurately see the income a person realizes, just close some loopholes and increase rates on stocks/options/interest/income - the whole gamut by som
Re: (Score:3)
What do you call an organization that you know ... (Score:3)
What do you call an organization that you know if you hired more people, each one would bring in 6 (I think 6 is the correct multiple, but if I am wrong it's in the same order of magnitude) times his/her cost of employment, but isn't allowed to hire more people?
The IRS.
Yes, folks, because of intense lobbying by rich people, the IRS is underfunded and those same rich people get away with avoiding taxes.
All those "hurr... durr... taxes bad" proclaimers: all they are doing is promoting their own poverty while the rich get richer. They are the useful idiots in the class war that many of the .01% people are fighting.
Taxes pay for roads and education and many other things that improve the quality of life of everyone.
So the US government also does not want taxes paid (Score:2)
Recently the French tried to set up some digital taxes for these IT megacorporations (Facebook, Google, etc). Trump threatened to put taxes on a load of French products in response. Yet his party is making sure these corporations don't even pay taxes in the US. Just a naive question, whose side are the US politicians on? ...
corporations aren't people!!! (Score:1)
here's a crazy idea: tax people, not piles of paper. problem solved.
oh, but then we'd be putting millions of corporate accountants, tax attorneys, auditors, and financial engineers out of work. that certainly would be a shame.
Re: (Score:2)