Facebook is shutting down Irish holding companies that they have been using to deliver and rack-up billions of profits to avoid paying taxes in the US, UK and hundreds of other countries.
Facebook’s Irish main company (subsidiary) has paid $ 101m (£ 75m) in taxes while recording a profit of more than $ 15bn in 2018, last year records have showed. Facebook companies around the world paid the Irish holding company for use of its intellectual property.
IRS’ Claim
Facebook International Holdings I Unlimited Company recorded revenue of $30bn in 2018, more than half of Facebook’s total global turnover of $56bn.
The company’s decision to close the Irish units and repatriate its intangible assets to the US came shortly after the US Internal Revenue Service (IRS) took the company to court claiming it owed more than $ 9bn in connection with its 2010 decision to transfer its profits to Ireland .
Prior to it’s stock market IPO in the year 2012, Facebook put its intangible assets at $ 6.5bn in 2010, but the IRS said the real value was $ 21bn.
The Shutdown Of Irish Units
The decision to shut down three of Ireland’s leading Irish companies was recorded by the Irish Companies Registration Office. First reported by The Times.
Facebook said in a statement that the Irish holding company “was wound up as part of a change that best aligns with our operating structure. In preparation for the unlimited company winding up, Facebook Ireland Holdings’ assets were distributed to its US parent company.
“Intellectual property licenses related to our foreign operations have been returned to the US… We believe it is in line with the latest and future changes in tax law by policy makers around the world.”
How Much Tax Does Facebook Pay?
Facebook claims that its effective tax rate over the past five years has exceeded 20%, which is in line with the global average of 23%, according to the Paris Organization for Economic Co-operation and Development. The effective tax rate rose to 25% in December 2019 from 13% by the end of 2018, according to the company’s results.
Facebook paid only £ 28.6m in taxes in the UK last year, despite recording £ 2.2bn in revenue from advertisers, according to accounts posted this month at Companies House. Tax payments had only increased by £ 100,000 last year although profits rose more than a quarter.
Margaret Hodge, the Labour MP and chair of the parliamentary group on responsible taxation, said the tiny tax payment “beggars belief”.
“While some companies have struggled during the pandemic, high technology giants has prospered as people spend more time online,” she said. “Facebook and all these tech giants have to do their job and pay their fair share.”
Google moved its intellectual property holdings from Ireland back to the US in January, before the closing of the “double Irish” tax loophole, which has been used by US companies to channel international profits through Ireland and on to tax havens like Bermuda, keeping them outside the US. Ireland agreed to close the scheme under international pressure five years ago but companies were given until the end of 2020 to comply.
