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The Purpose of a Company

December 6, 2013

The Register notes today that Facebook is doing its job… returning maximum value to shareholders.

Facebook has reportedly swerved a huge corporation tax bill by paying its Ireland-based parent company – Facebook Holdings Limited – €1.75bn in “admin costs” for its intellectual property.

According to the Financial Times (£), Facebook recently reported a pre-tax loss of €626,000 after it paid out those expenses.

There’s some activity involving shell entities in the Cayman Islands as well.  Facebook for it’s part, noted that it was supposed to, well, return value to its shareholders.

Facebook defended its actions by saying it “complies with all relevant corporate regulations including those related to filing company reports and taxation.”

Google, Amazon and Facebook have been among the big US outfits to come under fire from the UK Parliament, whose politicos have attacked the multinationals for creatively avoiding corporation tax bills.

Facebook as some 380 or so people in Ireland, which means that it supports 1500-2000 jobs (with the people that support the employees in society) and probably that number of households.  The people that work for Facebook likely make enough money that they heavily contribute to the tax base.  While it’s likely that some corporate taxes would go to support jobs in Ireland otherwise, it’s not the job of the company to support the society.  It’s the job of the company to return value to the owners and employ people in a manner that does that.  I’m not one of those types that thinks that a company is a person, it’s an entity that efficiently moves money.  Government is one that very inefficiently moves it.

So don’t put me in the category of thinking we need reform in this area… just in case you were wondering.

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