Amid Pressure, Facebook Will Stop Routing Ad Revenue via Ireland
Facebook has said it will start booking advertising revenue in countries where it is earned instead of re-routing it via Ireland, although the move is unlikely to result in it paying much more tax.
Corporate taxation has become a controversial topic in the wake of revelations of tax avoidance schemes by multinationals which have led to calls for companies to pay more tax, while the European Union has begun exploring options for taxing digital giants.
Dave Wehner, Facebook’s chief financial officer, said the company had decided to move to a local selling structure in countries where it has an office to support sales to local advertisers.
"In simple terms, this means that advertising revenue supported by our local teams will no longer be recorded by our international headquarters in Dublin, but will instead be recorded by our local company in that country," Wehner said in a blogpost.
"We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally supported sales in their countries."
Wehner said Facebook would implement the change throughout 2018 and aim to complete it by the first half of 2019.
The European commission is working on legislative proposals, expected in March, to increase taxes on multinational digital companies, who are accused of paying too little in the EU by booking profits in low-tax countries where they have their EU headquarters, such as Ireland and Luxembourg.
Among the options the EU executive is considering to quickly raise taxes on tech giants is a levy on revenues from advertising activities, according to an EU document published in September.
Many technology companies pay far less than their high street rivals.
Facebook’s UK operations paid just £5.1m in corporation tax last year, despite a jump in profit and revenues nearly quadrupling on the back of increasing advertising sales.
The social media company said revenues in the UK had risen from £210.8m to £842.4m for the year to 31 December, helping pre-tax profits increase from £52.5m to £58.4m for the period, according to accounts filed at Companies House.
But its UK corporation tax only rose to £5.1m from £4.2m a year earlier, and once deductible expenses were applied, the company only paid £2.58m.
Amazon’s corporation tax bill in the UK is 11 times smaller than that of British bookstores, a recent study found.
In Ireland, the European commission concluded that Apple paid 0.005% to Irish tax authorities in 2014, far below the corporation tax rate of 12.5%, and should pay €13bn in back taxes. Apple and the Irish government continue to fight the ruling.
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