Facebook proposed to use Ireland to avoid extra digital tax

Social media giant lobbied Paschal Donohoe on proposal in January meeting

Senior Facebook executives raised the possibility of using lower tax payments in Ireland to soften the blow of any extra digital sales.   Photograph:  Niall Carson/PA

Senior Facebook executives raised the possibility of using lower tax payments in Ireland to soften the blow of any extra digital sales. Photograph: Niall Carson/PA

 

Facebook lobbied to pay less tax in Ireland to offset millions of euro it would have to pay if other EU countries introduced new taxes on multinational corporations.

Senior Facebook executives raised the possibility of using lower tax payments in Ireland to soften the blow of any extra digital sales taxes at a meeting with Minister for Finance Paschal Donohoe in January, during his trip to Silicon Valley.

After an EU-wide proposal for a three per cent tax on certain digital revenues of multinational companies faltered late last year, France and Austria pushed ahead to introduce the tax on a national basis. Other countries may follow.

The move came in response to international criticism of the low levels of tax paid by many big multinationals.

Facebook officials asked “whether payment of national digital sales taxes in some jurisdictions through its Irish subsidiary could be offset against Irish tax,” according to minutes of the meeting with Mr Donohoe.

The argument in cases such as these is that companies should not be taxed twice on the same service in two different jurisdictions.

The European Commission proposal would be payable in the country of the technology’s user, not where the company’s headquarters is located. By levying tax on sales in big markets it was seen as likely to cut the profits they would declare for tax in Ireland.

Initial Revenue estimates indicated the EU-wide proposal could cost the exchequer €160 million a year, due to the large number of multinational tech firms who have their European headquarters in Dublin.

Facebook’s comments to the Minister for Finance indicate they believe that lower tax in Ireland would also result from unilateral decisions by other EU countries to go ahead and impose taxes in their jurisdictions.

As the digital sales tax is on revenues, not profits, there is no clear precedent to exactly how it would operate, or what it would mean for taxes in other jurisdictions.

Strong relationship

Late last year the commission’s proposal was stalled in Brussels, due to opposition from Ireland, Sweden and Denmark, with Germany also holding reservations. The EU ministers agreed to wait to see what emerges from a separate OECD tax reform process, which could also threaten lower tax payments in Ireland by the major multinational companies with headquarters here.

Former Liberal Democrats leader Nick Clegg was among senior Facebook executives who met Mr Donohoe. Chief financial officer Dave Wehner, and Facebook Ireland head of public policy Niamh Sweeney also attended the meeting.

Both Mr Clegg and Mr Wehner “spoke of a very strong relationship with Ireland and the positive investment climate,” minutes noted.

Facebook declined to comment on its meeting with Mr Donohoe.

The meeting was one of several Mr Donohoe attended with multinational tech firms during a three-day visit to California, the minutes of which have been seen by The Irish Times.

Ireland was described as a “model of co-operation” by tech giant Apple’s chief financial officer Luca Maestri during a meeting with Mr Donohoe.

Mr Maestri discussed the upcoming EU State-aid case, over Apple’s contested €14 billion tax bill, with the Minister.

The senior executive “expressed the hope that the hearing would be fair and noted the importance of the case for Apple, ” minutes show.

In 2016, the EU Commission ordered Apple to pay Ireland €13 bn plus interest in back taxes, after it deemed the Government had given the tech giant favourable tax treatment.

The Government has rejected the ruling, and is appealing the case to the European Court of Justice, as is the company.

Mr Donohoe “spoke of the strength of the Irish case” in the upcoming court battle, during the meeting.