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In a move that will be seen as a response to long-standing criticism by global governments of its tax planning, Facebook has announced that it will no longer book non-US revenues from large advertisers through its Dublin unit.
From January 1st, Facebook will begin the process of booking revenues from large advertisers in about 28 countries - including France and Germany and other major European markets - in the countries in which they were earned. It will also pay the taxes on those revenues in those countries, and not in Ireland.
When fully implemented, the decision is likely to result in a huge slice of the international income routed through Ireland - €12.6 billion in 2016 - being diverted elsewhere. Facebook’s Irish tax bill - €29.5 million last year - is also likely to significantly shrink.
“Today we are announcing that Facebook has decided to move to a local selling structure in countries where we have an office to support sales to local advertisers,” said Dave Wehner, Facebook’s chief financial officer.
“We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally-supported sales in their countries.”
In practice, the change will only affect the revenues of large advertisers which have contact with a local sales office. Non -US revenues from SMEs and individuals who advertise on Facebook using automated booking services will continue to be booked through Ireland.
Facebook did not say what proportion of the revenues currently booked through Ireland comprise large advertisers. It is understood that the move will have no direct impact on job numbers at its Irish operations, which employs more than 2,000 in Dublin.
Web giants such as Facebook and Google have come under increasing pressure from the European Union to book sales in the countries in which those sales were generated. The decision by Facebook to make the changes to its structure will be seen as an attempt by the company to get ahead of the curve, given the mood music about potential changes to international tax laws.