Summits Yellow

Facebook to start booking ad revenue locally in response to criticism over tax policy

David Murphy

Facebook is to start booking advertising revenue locally instead of re-routing it via its international headquarters in Dublin in a response to criticism it has faced over its approach to paying tax, according to a Reuters report.

“In simple terms, this means that advertising revenue supported by our local teams will no longer be recorded by our international headquarters in Dublin, but will instead be recorded by our local company in that country,” Facebook CFO Dave Wehner said in a blog post.

In April 2016, Facebook started recording revenues from its large customers in the UK in Britain, which resulted in an increase in the amount of tax it paid.

“We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally-supported sales in their countries,” Wehner said.

Wehner said Facebook would implement the change throughout 2018 and aim to complete it by the first half of 2019.

The move is unlikely, however, to result in Facebook paying much more tax, since it declares relatively little profit in Britain. It reported a profit margin of under 7 per cent for 2016 in Britain, compared to a group wide margin of around 45 per cent for the year.

Separately, Facebook has responded to criticism from its former vice-president for user growth, Chamath Palihapitiya, that social networks like Facebook and Twitter are "tools that are ripping apart the social fabric of how society works". Palihapitiya, also said he felt “tremendous guilt" over his previous work at the firm.
The statement said: “Chamath has not been at Facebook for over six years. When Chamath was at Facebook we were focused on building new social media experiences and growing Facebook around the world. Facebook was a very different company back then, and as we have grown, we have realised how our responsibilities have grown too.

"We take our role very seriously and we are working hard to improve. We've done a lot of work and research with outside experts and academics to understand the effects of our service on well-being, and we're using it to inform our product development. We are also making significant investments more in people, technology and processes, and – as Mark Zuckerberg said on the last earnings call – we are willing to reduce our profitability to make sure the right investments are made.”