By Caribbean News Now contributor
GEORGE TOWN, Cayman Islands — Social networking giant Facebook is facing criticism over its tax payments after filings revealed the company exported an estimated US$ 1 billion earned in the UK and other overseas markets to the Cayman Islands last year.
According to the Guardian newspaper, Facebook uses a subsidiary in Ireland to collect advertising revenue from around the world. Accounts filed in Dublin this week showed international earnings rising to US$2.45 billion in 2012, up from US$1.37 billion in 2011.
However, the Irish government collected just over US$7 million in tax from the world’s largest social media company last year, the Guardian reported.
Using a complex web of subsidiaries in a tax structure known as the “double Irish”, employed by a number of American multinationals, Facebook shelters much of the money it earns outside its home market from governments around the world, the newspaper explained.
The company reportedly paid no tax in Britain last year, despite earning an estimated US$364 million in one of the Europe’s biggest advertising markets. Facebook takes full advantage of London’s status as a hub for European advertisers.
A Facebook spokesman said: “Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation. We have our international headquarters in Ireland that employs almost 400 people and a series of smaller local offices providing support services all over Europe.”
Facebook’s UK operating company employs more than 120 staff, many in advertising sales, but advertisers are actually billed via the Dublin-based subsidiary, Facebook Ireland Ltd. Accounts show the business employed 382 staff last year, some of them in Ireland and some abroad, the Guardian reported.
The subsidiary collected revenues of US$2.45 billion last year, but this was wiped out by two items – the cost of sales and payments made to other group companies. Large sums go directly to the US, with about US$1 billion being paid to the listed parent company last year, but another one billion dollars was paid to Facebook Ireland Holdings for use of the platform.
According to the Guardian, the published ownership structure suggests Facebook may be diverting much of its international income to the Cayman Islands.
The company declined to comment on this aspect of its accounts.
Margaret Hodge, who chairs the British parliament’s Public Accounts Committee, has criticised Facebook’s tax record, accusing the company of apparently “deliberate manipulation of accounts of economic activity to deprive the British taxpayer of a rightful tax contribution”.
The G20 group of countries and the OECD are working to close tax avoidance loopholes, while prosecutors in Italy have initiated proceedings against Apple for similar arrangements to those being used by Facebook.