Facebook sweetheart tax deal could face investigation

facebook sweetheart tax deal
© iStock/ArtemSam

Margrethe Vestager, the EU’s Commissioner for Competition, is considering opening an investigation into the possibility of a Facebook sweetheart tax deal, as part of a wider probe into tax arrangements in the EU.

The commissioner is conducting a multinational investigation into sweetheart tax arrangements, where countries allow large businesses to strike preferential deals on how much tax they pay. The European Commission has held such deals to be a significant priority since 2014, treating preferential tax arrangements as a kind of unsanctioned state subsidy. The potential Facebook sweetheart tax deal under investigation would allow the company to reduce its tax commitments by offsetting the cost of its intellectual property acquisitions.

In 2016 Vestager ruled that Ireland must reclaim €13 billion in tax from Apple after unlawfully allowing the company to pay a heavily discounted tax rate. In 2017 and 2018 she ordered Luxembourg to recover €120 million from French energy provider Engie and €250 million from Amazon, saying in the latter case: “Almost three-quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules.”

It is alleged Vestager’s team has seized documents related to a potential Facebook sweetheart tax deal in Ireland as part of a wider trawl in the wake of the Apple investigation. Sources are divided on whether the investigating team will be able to find enough evidence to open a formal enquiry into the social networking company.

Facebook has been criticised in the past for enjoying low rates of tax in the UK and Ireland in comparison to its substantial profits. In May this year a court in California ruled that the company had underreported its revenues by around $7 billion (€6.2 billion) between 2008 and 2010 and would have to either pay back the unpaid tax or negotiate a deal with the Internal Revenue Service. Asked about an Irish Facebook sweetheart tax deal, Vestager said: “So far, we have no specific criticism of any legislation from the Irish Republic.”

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