Facebook changes tax structure to start billing ad sales locally

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For years, Facebook has legally minimised taxes by funnelling non-US income to the Republic of Ireland, a jurisdiction with only 12.5 per cent corporation tax.

Facebook has announced a change to its financial policy, meaning some advertising revenue will no longer be recorded in Ireland.

Faced with political pressure to alter its structure, Facebook said previous year that...

In future, revenues from all larger advertisers in these locations will be recorded, and the taxes paid, where the ads were sold instead of in Ireland.

Facebook Inc. announced a major change today to the way it reports advertising revenue outside of the USA, claiming that it wants to be more transparent with local governments and businesses.

Facebook says they will roll out the new tax structure through 2018 with the completion date to be mid-2019.

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The move will apply to all countries in which Facebook now has an office to support sales to advertisers, Facebook's Chief Financial Officer Dave Wehner said in a statement.

That means that rather than directly route its revenue to its global headquarters in Dublin, local policymakers and governments will potentially get an opportunity for greater visibility into the company's revenue related to local advertising sales. Facebook was careful to note that the new system would only apply in places where it already has a local office, and "this is a large undertaking that will require significant resources to implement around the world".

Facebook has since come under pressure from the USA and Europe for its tax practices.

Google, for example, booked €26.3 billion of global revenues here a year ago, paying tax of €163 million tax in Ireland.

Despite Facebook's efforts to mollify the growing clamor for tech companies to pay more tax, it remains unclear whether the social network's proposed changes will be enough to stop European Union policymakers from pushing ahead with changes to the region's tax policies.