Facebook Will Pay Taxes Locally

Ivan Schwartz
December 13, 2017

As part of its proposed changes, which will take effect starting early next year, Facebook said profits from the majority of its advertising revenue generated in countries where the company has a sales office will now be taxed locally.

That means that rather than directly route its revenue to its global headquarters in Dublin, local policymakers and governments will potentially get an opportunity for greater visibility into the company's revenue related to local advertising sales.

For years, Facebook has legally minimised taxes by funnelling non-US income to the Republic of Ireland, a jurisdiction with only 12.5 per cent corporation tax. A number of technology companies have been accused of setting up elaborate structures to minimize the amount of taxes they pay.

Facebook had already said that it would book ad revenue in the UK if it came from UK business, under pressure from the UK government. The U.S. and Canada still make up the biggest segment of Facebook's advertising revenue, though it's clear the company wants to continue to grow those worldwide businesses.

The European Commission is looking into ways to tax digital companies like Facebook as it seeks to raise money from an industry that the commission says provides less tax than it should.

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It's not clear whether this will actually have a significant impact on Facebook's existing structure.

Its move is sure, however, to lead to anxiety within Government at the first tangible evidence that European pressure over Ireland's role as a linchpin in the tax avoidance of multinationals is having an impact.

The change in policy will start being implemented in 2018, with all the company's local offices to switch over to the new model by 2019.

Facebook's announcement is an "important change that is a step in the right direction", the Italian Treasury said in a statement.

Other reports by GizPress

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