Facebook to pay local taxes instead of moving funds through Ireland
Facebook Inc. is changing its tax structure so that it will pay taxes in the country where sales are made, rather than funneling everything through its Irish subsidiary. The company said it will move to a “local selling structure” in countries where it has an office to support sales to local advertisers. Menlo Park, California-based Facebook shifted its international business operations to Ireland in 2010.
Facebook has since come under pressure from the U.S. and Europe for its tax practices. Last year, the company said it would stop routing U.K. sales through Ireland after public outcry over news that Facebook paid only 4,327 pounds (£6,128) in taxes in 2014. In the U.S., the company is locked in a battle with the Internal Revenue Service that may cost it more than £5 billion, plus interest and penalties, related to global operations that are reported by the Irish unit.
“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,” Chief Financial Officer Dave Wehner wrote Tuesday in a statement. 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. The Commission also has ordered Apple Inc. to pay about 13 billion euros (about £15 billion) in back taxes to Ireland, after it said the country granted unfair deals that reduced the tech giant’s corporate tax bill.
Apple and Ireland are appealing the ruling. Facebook’s announcement is an “important change that is a step in the right direction,” the Italian Treasury said in a statement. Wehner said Facebook plans to implement the change through 2018 with a goal of switching all its offices to the new structure by the first half of 2019.
The company has more than 30 international offices.
Facebook said it will keep its U.S. headquarters in Menlo Park and Dublin will continue to be the international hub.
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