French authorities have handed down an order for Facebook to pay more than USD $118 million in back taxes after a lengthy audit period found the social media giant owed millions in unpaid income taxes.
French authorities have ordered Facebook to pay the USD $118 million (AUD $170 million) owed in back taxes and penalty fees after a ten-year audit of its finances.
France has been pushing companies like Facebook, Google’s parent-company Alphabet, Apple and Amazon to pay more in income taxes with a proposed overhaul of its international tax rules on companies, particularly technology companies of this scale.
The authorities have said that companies like Facebook are able to escape significant income taxes on sales in France due to their subsidiaries being based in countries like Ireland, where there is a considerably lower income tax rate.
The audit of Facebook’s French subsidiary between 2009 to 2018 resulted in a settlement between Facebook and French tax authorities to pay 106 million euros in back taxes and associated penalties.
A Facebook spokesperson has said that Apple paid just 8.5 million euros worth of income taxes in the 2019 financial year, which was a reported 50% higher than the year previous. That spokesperson added that Facebook had, since 2018, been including revenue from its advertising sales on its books.
It is well below the normal tax rate that would be applied on the reported €1.3 billion (USD $1.5 billion) total revenue for Facebook in France last year, as cited by Capital in a Fortune article.
According to that report, France is planning on rolling out a new 3% digital tax on revenue earned in France that would be applied to companies like Alphabet, Apple, Facebook and Amazon. This is to combat the impact of companies like Facebook basing themselves in Ireland, where there is a comparative income tax rate of 12.5% compared to France’s 31%.
European regulators have now called that practice into question, asking that tech companies pay their share of tax in and to the countries in which they’re operating, rather than sending that money to Ireland.
According to a report from Reuters, “Facebook’s total net revenue almost doubled in 2019 from a year earlier to 747 million euros, a copy of Facebook France’s 2019 annual accounts, filed with France’s companies registry and seen by Reuters, showed.”
“We take our tax obligations seriously, pay the taxes we owe in all markets where we operate and work closely with tax authorities around the world to make sure we abide by all applicable tax laws and resolve any litigation,” the spokesperson said.
“Since 2018, we have changed our selling structure so that revenue from advertisers supported by the team in France is now recorded in this country. This year, we are paying €8.46 m in tax revenue in France, a nearly 50% increase on last year.”