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It has shut down an Irish holding company that Facebook has been using for tax evasion over the past few years.
Facebook has continued for years to avoid taxation, which uses cheap Irish corporate taxes to account for global advertising revenue as an Irish holding company. In fact, the 2018 sales of the problematic holding company Facebook International Holdings were $30 billion. Facebook accounts for more than half of global sales of $56 billion.
The average corporate tax of the Organization for Economic Cooperation and Development is 24.9%, but the US corporate tax is 35%. In contrast, the Irish corporate tax is 12.5%, which is a significant difference in the tax rate, so this tax avoidance method was effective.
On December 16, 2020, Facebook has shown a move to shut down the problematic holding company, such as transferring user data from Ireland to their home country. However, on December 27, local time, Facebook closed Facebook International Holdings. In response, Facebook explained that it had dissolved the company as part of a change according to the management system, and said that the company’s intellectual property licenses and other assets were transferred to the US Facebook headquarters.
The Facebook move can be said to be related to the case that the IRS, which is responsible for the enforcement and collection of federal taxes in the United States, has announced that it will collect a large sum for avoiding Facebook taxation. Reports point out that in the UK, despite Facebook ad revenue of £2.2 billion, the tax paid was £28.6 million.
Meanwhile, in January 2020, Google also made a decision to curtail tax evasion using Ireland and Bermuda. Related information can be found here .
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