Facebook in fresh tax avoidance controversy
On 5th December 2013 The Guardian reported that Facebook was facing fresh controversy over its tax contributions after company filings revealed that the social network exported an estimated £645m earned in the UK and other overseas markets to the Cayman Islands tax haven in 2012.
The article said that Facebook used a subsidiary in Ireland to collect advertising revenue from around the world. Accounts filed at the beginning of December 2013 showed that business was booming, with international earning rising to £1.5bn in 2012, up from £840m in 2011. The accounts showed that the Irish government had collected just £4.4m in tax in 2012.
Using a complex web of subsidiaries in a tax structure known as the "double Irish", employed by a number of American multinationals, Facebook sheltered much of the money it earnt outside its home market from governments around the world.
Facebook's UK operating company employs more than 120 staff, many in advertising sales, but advertisers were actually billed via the Dublin-based subsidiary, Facebook Ireland Ltd.
The subsidiary collected revenues of £1.5bn last year, but this was wiped out by two items – the cost of sales and payments made to other group companies.
Large sums go directly to the US, with £670m being paid to the listed parent company last year. But £645m was paid to Facebook Ireland Holdings for use of the platform.
The second subsidiary was based in Ireland but did not file full public accounts. This meant the final destination of any payments out of Facebook Ireland Holdings was untraceable. However, there were clues to its ownership – filings showed Facebook Ireland Holdings was owned by a number of Facebook subsidiaries based in the Cayman Islands, a jurisdiction that did not levy corporation tax.
The ownership structure suggested that Facebook may be diverting much of its international income to the tax haven.
The company paid no tax in Britain last year, despite earning an estimated £223m in one of Europe's biggest advertising markets.
A Facebook spokesman said: "Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation. We have our international headquarters in Ireland that employs almost 400 people and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe."
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