Facebook is closing off its holding companies based in Ireland through which it channeled billions of profits, saving millions in taxes in the US, the UK and hundreds of other countries.
The company’s main Irish subsidiary paid $101m in tax while recording profits of more than $15bn in 2018, the last year for which records are available. Facebook companies around the world paid the Irish holding company for use of its intellectual property.
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 divisions and return its intellectual property to the US came in the wake of a decision by the US Internal Revenue Service (IRS) to take Facebook to court claiming it owed more than $9bn linked to its 2010 decision to shift its profits to Ireland. Before its stock market flotation in 2012, Facebook valued its intangible assets at $6.5bn in 2010, but the IRS claimed the true value was $21bn.
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.
It explained that “intellectual property licenses related to our international operations have been repatriated back to the US … We believe it is consistent with recent and upcoming tax law changes that policymakers are advocating for around the world.”
Facebook said its effective tax rate over the past five years exceeded 20%, which is in line with the global average of 23%, according to the Paris-based Organisation for Economic Co-operation and Development. Its effective tax rate rose to 25% in December 2019 from 13% in late 2018, according to the company’s results.
Facebook paid just £28.6m in tax in the UK last year, even though it recorded £2.2bn in gross revenue from advertisers, according to accounts filed this month at Companies House. Margaret Hodge, the Labour MP and chair of the parliamentary group on responsible taxation, said the tiny tax payment “beggars belief”
via The Guardian
