Belfast Telegraph

View from Dublin: Facebook paying more tax has got to be good news

By Richard Curran

There's no need to panic yet about Facebook's decision to book profits locally on international European sales, instead of channelling it all through Ireland. The concern from an Irish exchequer point of view might be that the move signals change is in the wind.

The good news on a social level is that the move shows the intent by this digital giant to pay more tax somewhere.

It won't tumble Ireland's foreign direct investment edifice just yet. Here is why.

The EU has been moving towards grabbing more tax at point of transaction from tech giants. It has been considering some kind of 6% turnover tax levied in the country where the product is sold.

Last year, Facebook moved around €12.2bn (£10.8bn) through Ireland. Such a turnover levy or tax, in theory, could see the tech giant pay around €730m (£644m) on that €12.2bn.

Facebook has instead decided to move ahead of the game and announce that it will book revenues in local markets. It will then end up paying corporation tax on the profits it books in each of those countries. The level of profit will be determined by what expenses or offsets it uses against its income in each country. This way, it could end up paying more than it has up to now, but a lot less than €730m on those European transactions.

It is an early concession, but quite a clever one. In the global game of tax chess that is going on right now, it has moved first in the direction things are going anyway. This way it has grabbed positive headlines and stolen a march on plans for a turnover tax.

Ireland has little to lose from the Facebook decision alone. Facebook employs around 2,000 people in Ireland and they pay lots of income tax and there are obvious significant benefits to the economy flowing from that.

It only paid corporation tax of €29.5m (£26m) on that €12.6bn (£11bn) of revenues in Ireland anyway. There will be no great hit to the Exchequer from this. Even if other tech companies follow suit, the direct hit to Irish corporation tax is likely to be modest. We already allow them to write off 80% of the cost of developing or acquiring their intellectual property.

The wider investment case for new foreign direct investment projects could be hit by the new corporation tax plans being hatched in Washington. But we shouldn't panic yet. And we have to bear in mind that overall this is a positive outcome as it's likely to see more tech giants pay more corporation tax in different countries. Surely, that's in everybody's interest.

Belfast Telegraph

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