DUBLIN, Ireland - In a bid to overhaul its tax structure, Facebook has decided to pay its tax in the country where profits are earned, instead of using an Irish subsidiary.
Facebook said that it is to make the change in every country outside the U.S. where it has an office.
Facebook said last year that it would stop routing U.K. sales through Ireland for tax purposes.
The company’s announcement comes after large firms were pressurized over their tax affairs from governments and the public.
Dave Wehner, Facebook's chief financial officer said in a statement, “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.”
According to reports, the move will affect how Facebook pays taxes in 30 countries including Germany, France, Spain, Italy, the Netherlands, Belgium, Norway, Poland, and Sweden.
In 2014, Facebook sparked a public outrage in the U.K. after it emerged that the company had paid just 4,327 pounds in tax.
Then, in April 2016, the company began booking more advertising income through its U.K. office, instead of Ireland.
In 2016, Facebook paid 5.1 million pounds in tax in the U.K., up from 4.2 million pounds in 2015, on revenues of 842 million pounds.
However, Professor Prem Sikka of the universities of Sheffield and Essex said that the new change does not necessarily mean it will start paying more tax in other countries as a result of the overhaul.
He said that taxes are paid on profits, and "the huge difficulty with large companies is trying to determine exactly what the profit is.”
Adding that there are a number of ways firms can muddy the waters, including charging intra-group management fees, royalty fees, and profit-sharing.
Professor Sikka said that the move by Facebook "may well be appeasing public opinion, while at the same time it takes a very small hit on its profits, if any."
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