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18th Jan 2020

Facebook to shift ad revenue away from Ireland

  • Facebook says it now wants 'greater visibility over the revenue associated with locally supported sales.' (Photo: portal gda)

Facebook will no longer use Ireland as a means to slash its global tax bills following public and EU pressure over dubious corporate tax structures.

The move was announced Tuesday (12 December) by Facebook's chief financial officer Dave Wehner.

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Wehner said the company will stop rerouting international advertising sales through its Irish-based subsidiary, with an aim to start making the necessary changes in 2018.

"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," he said, in a blog post.

He described the plan as part of a larger strategy to provide greater transparency to governments and policymakers around the world.

The shift will likely pile on pressure for other big tech firms like Apple and Google, who also have their international headquarters based in Ireland, to follow Facebook's lead.

Facebook last year shifted just under €13 billion in revenues to Ireland, which in turn generated some €30 million in tax revenue to the country.

But such moves have sparked resentment among other countries, like France and Germany, where the bulk of the sales and profits were made in the first place.

Ten EU finance ministers in September, led by France's finance minister Bruno Le Maire, had demanded that big internet firms pay taxes on their turnovers, rather on profits, in an effort to raise more money for the public coffers.

The EU commission has also been shoring up pressure as it works out proposals on creating new rules to capture taxes from companies that make their money online.

Such online firms often manage to cut their bills, putting their more traditional physical-store based competitors at a huge disadvantage.

"On average, domestic digitalised business models are subject to an effective tax rate of only 8.5 percent, less than half compared to traditional business models," says the EU commission.

A study out in September by the London-based Centre for Economics and Business Research had also found that UK booksellers pay 11 times more than Amazon in corporation tax.

EU Commission president Jean-Claude Juncker had earlier this year said some €70 billion is lost to public coffers in Europe every year.

"The tax burden is 30 percent heavier on individuals than it is on multinational companies, so that is in intolerable," he said.

The commission wants a common corporate tax base for companies as part of its broader tax harmonisation policy.

The policy, tabled last year, would prevent multinationals from evading tax while allowing EU states to set their own tax rates. It aims to close loopholes exploited by big firms who shift their profits to low-tax regimes.

Pierre Moscovici, the EU finance minister, earlier last month demanded that member states adopt the common tax base, or CCCTB, to increase transparency.

But EU states like Malta balk at the idea over fears it would undermine their corporate tax competitiveness.

A recent report by the UK-based NGO Tax Justice Network says the proposal would slash Malta's tax base, as well as those of Estonia and Slovenia, by more than half.

Other bigger economies like Germany, Spain, United Kingdom and Italy would all see a substantial increase, it notes.

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