Facebook to pay taxes locally, instead of through Ireland

  • Facebook to pay taxes locally, instead of through Ireland

Facebook to pay taxes locally, instead of through Ireland

Dublin will remain the site of its global headquarters.

The European commission is working on legislative proposals, expected in March, to increase taxes on multinational digital companies, who are accused of paying too little in the EU by booking profits in low-tax countries where they have their EU headquarters, such as Ireland and Luxembourg.

The social networking giant, along with other technology firms, has faced growing criticism over the way it reports its taxes, particularly in the European Union.

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.

Last year, Facebook began recording revenues for United Kingdom sales in Britain, resulting in a modest increase in the tax it paid there.

Facebook has since come under pressure from the USA and Europe for its tax practices. In the US, 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 policymakers around the world", David Wehner, Facebook's chief financial officer, said in a blog post Tuesday. "We will roll out new systems and invoicing as quickly as possible to ensure a seamless transition to our new structure", he said.

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.

Corporate taxation has become a hot-button topic in the wake of revelations of tax avoidance schemes by multinationals which have led to calls for companies to pay more tax.