After Google and Amazon, French tax authorities target Facebook

Nov 15, 2012
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Facebook photoIn recent weeks, we’ve been covering quite extensively Google and their quarrels with the French government. An attempt to re-instate the Google Tax led to French media banding together to propose a law forcing Google to pay royalties for snippets used on Google sites. This all happened as French tax authorities investigate Google France & Google Europe’s revenue, claiming Google France may owe as much as $1.7 Billion if France can prove that revenue earned by French consumers/clients was obtained through the Google France office. Then this week we found out that Amazon has also been called to pay $252M in back taxes from 2006-2010. Microsoft too has passed from its former status in France as paying what the French government thinks it should to paying down near 2% of the revenue generated by French clients.

And now L’expansion has reported that this past summer, French authorities began an investigation into Facebook‘s Paris office about the exact same tax problems. As reported, Facebook declared €1.55B in global revenue in 2010, and the UK and France declared €16.2M and €1.2M in revenue respectively, just over 1% of the global revenue, even though 38% of its revenue was generated internationally. In 2011, only figures for UK were disclosed.

Google, Microsoft, Amazon & Facebook – The Double Irish Club

While companies like IBM are respected in France for paying ‘appropriate’ tax in France (that is, they declare all their revenue from French clients in France), these four US multinational tech companies have found a tax avoidance strategy that lowers their tax rate significantly – it’s called the Double Irish.

Since the European Union allows for easy trade between countries, businesses can maintain a European HQ in one country and operate in another. Ireland’s strategy for attracting foreign investment has long since been its low corporate tax rates, meaning multinationals can registered all their income in Ireland. Beyond that, other advantages like the “dutch sandwich” exist, using a tactic which takes advantage of the fact that Irish tax authorities overlook certain European member states’ (like Holland, Switzerland, and Luxembourg) withholding tax, meaning that it never gets registered in Ireland, and thus is not taxed.

The United States doesn’t get off too well either – once the money goes through Ireland, it is sent to tax havens like certain countries in the Bahamas, where they cannot be taxed on it in their corporate HQ – where do you think Apple’s $160 Billion is sitting – Wells Fargo?

And while most people will yell and say that taxes are stupid and the government is bad and all that, the reality is that this is a problem that Europe needs to face. And while some may point to Ireland as the source of the problem, one can easily point to countries like France who have a 33.33% tax rate and say “is that realistic in a global marketplace?”

Facebook Paris currently employs 30 people in its Paris office, and according to recent study by Deloitte, contributes directly or indirectly to 22,000 jobs in Paris. The company commented that it “takes its fiscal obligations very seriously.”