Meta’s Irish subsidiaries are at the centre of a fresh attempt by the US Internal Revenue Service (IRS) to recover $16 billion from the Facebook owner in a long-running dispute over the shifting of profits to lower tax jurisdictions.
Authorities believe the tech giant booked tens of billions of profits in the Republic more than a decade ago that should have been taxed in the US.
The Wall Street Journal reported on Thursday that Meta disagrees with the analysis and has now sued the IRS in the US tax court.
It is Meta’s third tax court case since 2016, the news outlet reported, all stemming from 2010 transactions involving Meta’s Irish subsidiaries.
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One legal case resulted in a split decision this year, which could still be appealed, while the other is pending.
Meta Ireland has been approached for comment.
In the latest tax case against Meta, the IRS is trialling what the Wall Street Journal described as an untested legal argument that could provide it with a new avenue to tackle profit shifting by large corporations.
At issue in the case is the tax treatment of intellectual property (IP) and other intangible assets like patents that can be easily transferred across borders.
The cases are rooted in a series of so-called transfer pricing arrangements between Facebook’s US parent and its Irish hub, which were put in place before the technology company’s flotation on the stock market in 2012.
Under these arrangements, Facebook’s Irish hub paid royalties to its US parent for the use of the social media giant’s intellectual property.
The lower the value Facebook placed on the IP, the fewer royalties the Irish unit would have to pay to the US. This would leave more profits in the Irish unit, where it would face lower taxes, and less in the US, where it would have been taxed at 35 per cent.
One Irish tax expert, who spoke to The Irish Times on Thursday, said that due to the historical nature of the matter, the tax case is unlikely to have ramifications for the Republic’s corporation tax receipts.
However, he said it was more “bad press” for the country and its tax treatment of multinationals.
The European Commission forced the closure of the controversial “double-Irish” tax arrangement in 2019, through which companies avoided tax by putting their intellectual property into an Irish-registered company that is controlled from a tax haven such as Bermuda.
Yet, European officials have continued to accuse the State of facilitating tax avoidance by multinational corporations, allowing them to shift their profits to more favourable tax jurisdictions.
