Social media leader Facebook has set up a complex structure of foreign subsidiaries, stretching from Amsterdam and Ireland to the Cayman Islands in the Caribbean in order to avoid paying millions in tax to the US.
Dutch freesheet De Pers reports on Friday that Facebook’s Amsterdam office bears all the hallmarks of an unused space – no one actually works there, the paper claims.
In its attempt to slash its tax burden, Facebook is apparently using a permissible accounting known as transfer pricing, where multi-national companies channel profits to low-tax jurisdictions while incurring costs where taxes are high.
Low tax rates
The Netherlands and Ireland afford favourable climates for this kind of practice. The Netherlands has signed numerous global treaties which legitimise the flow of interest, royalty and dividend funds into the country for a low or even negligible tax rate. Through a tax treaty with the US, the money can then be transferred to the US.
Ireland, with a current 12.5 per cent corporation tax rate, is attractive for companies with overseas intellectual property income. Most of Facebook's revenue generated through advertising companies across Europe is paid to the Dublin office. In this way, Facebook minimises its tax bills in its big overseas markets such as Britain.
Mark Zuckerberg, who founded the site in Harvard eight years ago, claims making money was never his primary objective. Facebook is preparing for its stock market debut with a value as high as 100 billion US dollars being estimated
© Radio Netherlands Worldwide