Facebook responds to criticism – company to pay taxes locally on advertising revenue

Anne Freier | December 14, 2017

Mobile Advertising

Following a row of criticism over how it pays taxes, Facebook has decided to record its advertising revenues locally instead of in its Dublin international headquarters. The changes will be implemented throughout 2018 and should be completed by mid-2019.
Dave Wehner, Facebook’s CFO, stated in a blog post:

“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.”

Back in 2016, Facebook began paying some of its British taxes within the UK, which led to an increase in taxes 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 adds.

It is unlikely that Facebook will end up paying much more in taxes, given that it declares relatively small amounts. For example, for 2016 the social media network reported a profit margin of just under 7%. Its group-wide margin was 45% for 2016.
In addition, the company has addressed concerns about social networks raised by former VP of User Growth Chamath Palihapitiya, who expressed regret over having worked for Facebook and recently reflected that social networks were “ripping apart the social fabric of how society works”.
According to a statement, Facebook responded:

“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.”

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