Kansas City, MO (PRWEB) March 12, 2013
According to University of Missouri, Kansas City accounting student Nickhil Gholkar, Facebook—the leading social media company—has remained in the spotlight of the financial world for several different reasons. He explains that as a newcomer to the digital world, Facebook exemplified the ingenuity of youth and the power of startups in the competitive business world. When the company went public, Gholkar explains that the positive response to “considerably high” stock offerings demonstrated just how much trust people were willing to put into the social media giant. Now, according to a recent article from Forbes, Facebook is gaining attention in the financial world for not having to pay taxes—an issue that many find controversial, given the billions of dollars that the company is associated with.
As a leading accounting student, Nickhil Gholkar explains that the upset over the lack of tax payments are understandable, seeing as how a majority of citizens—who typically just deal with their own relatively smaller income tax returns—are not familiar with the taxation system. The Forbes article provides a little more detail as to why Facebook is able to skirt tax payments legitimately, “Despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes. Instead, Facebook says it will receive net tax refunds totaling $429 million. Facebook’s income tax refunds stem from the company’s use of a single tax break, the tax deductibility of executive stock options.”
The article notes a couple reasons why Facebook does not pay taxes; most seem to relate to the concept that taxing a new business on its income could place the company at a disadvantage against established competitors. For this reason, “Corporations do not get taxed on profits purely in any one tax year. They get taxed on cumulative profits over time.”
While some citizens may argue against the tax circumstances of Facebook, Nickhil Gholkar explains that the system is necessary in order to encourage economic growth. One of the founding principles of the United States. Gholkar states, “This is a prime example that most individual taxpayers in the United States do not have a good understanding of how the basic accounting system works. Facebook and all companies that are growth companies must be allowed to have these tax allowances in order to grow and become profitable which in turn will allow for more tax income to be generated in future years of operation.”
However, given the amount of individuals who have spoken against the lack of tax payment, many question if there is not a better option for new companies facing exceptional growth during their first years. “One possible solution to this issue would be that stock options that are treated like depreciation that has a book-tax timing difference would end. It’s possible this could change in an ever-evolving accounting world; but the odds are against it for now,” Nickhil Gholkar answers in a final statement.
Nickhil Gholkar is an accounting major at the University of Missouri, Kansas City, where he is recognized as a student on the Dean’s List. He is also a candidate member, approaching full recognition, of the national accounting honor society—Beta Alpha Psi. With a passion for finance, Nickhil Gholkar has plans to pursue a career in private equity—such as mergers and acquisitions—at one of the country’s top public accounting firm. Apart from his studies, Gholkar is also recognized for his athletic abilities in soccer, golf and tennis. Nickhil Gholkar is also dedicated towards charity as he has participated in Volunteer Income Tax Assistance and Habitat for Humanity efforts.