Mark Zuckerberg admits that Facebook “may have to pay more” because it supports reforms for taxation on technical giants
Facebook CEO Mark Zuckerberg seems to increasingly accept the fact that his company will have to pay billions of more taxes to European governments.
Zuckerberg is expected to agree to newly proposed reforms that are likely to result in paying billions more in taxes to the British government and other developed countries, according to Times of London.
The founder of Facebook, 35, is likely to announce his decision at the Munich Security Conference, which starts on Friday.
Zuckerberg, the fifth richest man in the world, has an estimated net worth of $ 78.9 billion.
President Trump has threatened European governments, including the United Kingdom and France, with rates on their imports as they attempt to impose additional taxes on American tax companies.
Facebook CEO Mark Zuckerberg (shown above on Capitol Hill in September) is scheduled for Friday at the Munich Security Conference in Germany
Trump’s administration claims that since most technical giants are based in the US, any attempt to further tax these companies amounts to discrimination against US companies, and therefore justifies retaliation.
The reforms are proposed by the Paris-based Organization for Economic Development (OECD), which wants to burden internet giants such as Facebook and Google.
European governments say that large multinationals such as Facebook, Google, Amazon and Apple have used complex schemes to prevent taxation, such as registering their companies in tax havens such as Ireland and at the same time making huge profits on mainland Europe.
The OECD wants companies to pay a tax rate based on the products and services they generally sell and not based on their profits, which companies can register in low tax jurisdictions such as Ireland.
That would mean that companies would have to pay more taxes to governments, even though they are not physically present in their country.
Europeans are not the only ones to accuse Facebook of tax evasion.
A complex, long-standing legal battle between Facebook and the IRS will finally be resolved in court, as the company tries to ward off tax-dependent taxes that could cost it around $ 9 billion.
The lawsuit starts this week in the US tax court, where the IRS will claim that more of Facebook’s profits should have been taxed at the higher US rate, rather than the company’s Irish subsidiary, The Wall Street Journal reported.
Bertie Thomson, a spokeswoman for Facebook, said the company is looking forward to presenting his case in court.
President Trump (above) has threatened to impose tariffs on European imports, including those from France and the United Kingdom, if they abide by plans to impose a ‘digital tax’ on technical giants such as Facebook and Google
“This test is about transactions that took place in 2010, when Facebook had no mobile advertising revenue, its international activities were on the rise and its digital advertising products were unproven,” she told the magazine in a statement.
“Our company has had hits and misses, but we stand behind the actions that were taken more than ten years ago in a time of great risk and uncertainty for the company.”
The government has stated in court that in 2010 Facebook Inc. sold the rights to operate the Facebook platform outside the United States and Canada to Facebook Ireland Holdings.
The price used for intangible real estate was determined by Facebook tax adviser Ernst & Young (E&Y).
“The provisional positions of the IRS research team suggested that the E&Y valuations of the transferred intangible assets were underestimated by billions of dollars,” the lawsuit said. E&Y was not immediately available for comment.
The OECD expects the reforms to generate an additional $ 100 billion in revenue from various companies.
“We want the OECD process to succeed so that we have a stable and reliable system for the future,” Zuckerberg will tell the Munich Security Conference on Friday.
“We accept that this may mean that we have to pay more taxes and have to pay this at different places.”
The finance ministers of the OECD countries have discussed this in the last two months. A final deal is expected by the end of the year.
If the OECD can agree on a set of uniform guidelines, that would save individual governments from levying their own digital tax.
Last month, the United States set out the prospect of starting a trade war with the UK if the British government were to make plans to tax American technology giants.
Finance Minister Steven Mnuchin said that President Trump will personally put pressure on Prime Minister Boris Johnson to drop the proposed tax.
However, the British government has insisted on continuing with the proposed 2 percent tax.
In 2018 Facebook made a profit of $ 2.1 billion in the UK, but according to the Times of London it only paid $ 36.5 million in taxes.
Facebook has been accused by numerous governments of using complex legal regulations to prevent taxes from being paid
Facebook has claimed that it has paid all taxes that it owes by law. The company said it would pay $ 3.8 billion in corporate income tax worldwide in 2018.
Savid Javid, who resigned on Thursday as Chancellor of the Treasury, said last month that the tax on digital services will be introduced from April, but will only be a temporary measure until an international agreement on how to deal with large online businesses such as Google and Facebook.
It was clear to Mnuchin that the White House is fiercely opposed to the move because he hinted that retaliation rights could be imposed on the UK auto industry if the tax was rolled out.
The US and France have announced a ceasefire over President Emmanuel Macron’s plans to introduce a similar measure after Washington reacted with a threat to lower punitive rates on products such as French cheese and wine.
Javid said the tax – a two percent tax on search engine revenues, social media platforms, and online marketplaces that generate value from UK users – will be introduced.
The previous Chancellor said at the World Economic Forum in Davos, Switzerland last month: “We plan to continue with our digital services tax in April.
“It is important – as we said when we first introduced it to Parliament and introduced legislation for it – it is a proportional tax.
“It is a tax that is deliberately designed as a temporary tax, and will disappear as soon as there is an international solution.”
The United Kingdom has urged the OECD to continue to maintain the tax, which took time to make the urge for an international approach a success.
Asked if a post-Brexit trade agreement between the US and the UK will be possible if Javid continues the tax, Mnuchin said “we will have a number of private conversations about it,” adding, “I’m sure this will be worked out.”
Mnuchin appeared next to Javid on a panel in the Swiss ski resort: “I’m sure the president and Boris will talk about it, just like the president with Macron.”
He argued that a digital tax is “discriminatory in nature” and that the US is participating in the OECD process to find a solution.
“If people just want to tax randomly on our digital companies, we will consider taxing randomly on car companies,” he warned.
A thumbs up symbol is at the entrance of the European headquarters of Facebook Inc. in Dublin, Ireland in a file photo. Facebook has used its physical location in low tax jurisdictions, such as Ireland, to claim a lower taxable income, according to critics
The US believes that the tax is fundamentally unfair because most companies to which this tax would apply are based in North America.
But Javid said there is a growing spread between where customers of online businesses are located and where they are taxed.
“This requires an international solution and that is something I think we all agree on,” he said.
Although there is no international agreement yet, “this could be the year of change,” the former Chancellor added.
The prospect of a trade war with the US is likely to raise major concerns in the UK industrial sector.
Trump has not hesitated before to take action against countries that he believes the US is unfair about trade.
A dispute with China now seems to be cooling, but Trump is still not satisfied with US relations with the EU.
He said today that he believed that the bloc would agree to more favorable trading conditions, because if that were not the case, he would impose “very high rates” on European products.
“They’re going to make a deal because they have to,” he said.
‘They have to. They have no choice. ”
Google says it will not use a tax gap in “Double Irish, Dutch sandwich” tax legislation
Google’s mother Alphabet will no longer use an intellectual property license scheme, known as the “Double Irish, Dutch sandwich,” which could delay the payment of US taxes from 2018.
A Google spokesperson confirmed last month that it would abolish the licensing structure, saying it was in line with international rules and followed changes to US tax legislation in 2017.
Dutch applications, seen by Reuters, showed that Google moved 21.8 billion euros ($ 24.5 billion) through its Dutch holding to Bermuda in 2018, compared to 19.9 billion in 2017.
Google said it would end the practice after 2019.
“A date of termination of the company’s licensing activities has not yet been confirmed by senior leadership, but management expects this termination to occur on December 31, 2019 or in 2020,” the Dutch filing said.
“Consequently, the turnover and the associated cost base of licensing activities will be stopped from this date,” the application added to the Dutch Chamber of Commerce.
Google mother Alphabet will no longer use an intellectual property license scheme, known as the ‘Double Irish, Dutch sandwich’, which could delay the payment of US taxes, according to tax returns 2018
Google, like other multinationals that use international tax minimization strategies, has always said it pays all its taxes.
“We are now simplifying our corporate structure and will license our IP (intellectual property) from the US, not from Bermuda,” a spokesperson said in a statement.
“Including all annual and one-off income taxes over the past ten years, our worldwide effective tax rate is more than 23%, with more than 80% of that tax in the US.”
For more than ten years, Dutch, Irish and US tax laws have allowed Google to enjoy an effective single-tax rate on its non-US earnings, about a quarter of the average tax rate in its overseas markets.
The subsidiary in the Netherlands was used to transfer income from royalties earned outside the United States to Google Ireland Holdings, a branch in Bermuda, where companies do not pay income tax.
The tax strategy was legal and allowed Google to avoid US income tax or European withholding tax on the funds, which represent most of the foreign profits.
Under pressure from the European Union and the United States, Ireland decided in 2014 to gradually phase out the scheme, thereby ending Google’s Irish tax breaks in 2020.
The Tax Cuts and Jobs Act of the Trump administration, which came into force in January 2018, put an end to the reason for US companies to collect foreign profits offshore. Now, profits made and taxed abroad are not subject to tax on return to the US
In the Bermuda application for 2018, Bermuda-based “Google Ireland Holdings Unlimited Co.” said in the future that it would no longer retain intellectual property licenses or hold debt securities, but that it would continue to invest in shares.