The Strategist

Facebook revises its tax policy in Europe

12/13/2017 - 13:25

Facebook will no longer register all its revenue at its headquarters in Ireland. The social network intends to transmit data on income from advertising to the authorities of those countries where this revenue is generated. For the time being, only the countries where the corporation has offices are concerned. The company plans to fully switch to the new financial reporting scheme by mid-2019.

Bhupinder Nayyar via flickr
Bhupinder Nayyar via flickr
On Tuesday, Facebook announced that it is moving to a "local sales" model. As the company explained, this means that the advertising revenue received by units in different countries will no longer be registered at the international headquarters in Dublin. Instead, revenues will be recorded for local units and taxed by local authorities. "We are confident that the move to a" local sales "system will provide more transparent data to governments and legislators around the world. They have called for greater transparency in revenue generated from sales in their countries," the report said.

Facebook is not the first US IT giant, which changes the structure of tax deductions under the pressure of European authorities. For example, Amazon began to register revenue in each European country separately as early as 2015. Prior to that, all European revenues had passed through the office in Luxembourg. However, this did not help the online retailer to avoid problems with the authorities, who are seeking from the company a payment of € 250 million. In their opinion, the EU treasury has received less in the previous years. Google made a similar decision in 2016.

Ireland attracts international corporations relatively low taxes - here they are only 12.5%. That is why many American companies have sought to move their headquarters here. However, before the eyes of Facebook, there is an example, when the transfer of all of its European revenues to Ireland ended badly for the IT giant. It's about Apple, which in August 2016 was fined by the European Commission for $ 14.5 billion for a deal with the Irish government. The EU antitrust authority admitted that the Irish authorities helped the American corporation significantly understate the amount of tax deductions in the period from 2003 to 2014.