Facebook France to pay €106 million in new tax settlement

Facebook France is to pay €106 million in tax adjustments after an investigation found it had not properly declared revenue generated in France before 2018.

25 August 2020
The Facebook app logo on a phone screen. Facebook France to pay €106 million in new tax settlementFacebook has long been accused of not paying enough tax in France, but it maintains it has always acted legally and paid what it owes
By Connexion journalist

The amount includes €22 million in penalties.

The sum has put the company’s French arm at a loss, with it recording a loss of €88 million and negative capital of €70 million for accounts in the year 2019, records show.

The French arm of the US technology giant confirmed that it had “concluded an agreement with the financial administration for the years 2009-2018, to which we will pay a settlement of €106 million”.

The settlement comes after the issue first came to light in 2012, after a “raid” of the Facebook France officers by financial officers, which was reported by newspaper l’Express.

GAFA tax plans

France has repeatedly said that digital companies operating in France - known as “les GAFA”, for Google, Amazon, Facebook and Apple - should declare their incomes in France and pay proportionate tax - despite the administrative court later overruling this.

Each company has therefore come to a financial agreement separately, with Google’s settlement coming to €1 billion; Apple, €500 million; and Amazon, €200 million.

Now, head of Facebook France, Laurent Solly, has told newspaper Le Parisien: “Facebook will pay more and more taxes in France. That’s to be expected. In many ways, Facebook is now a French company too, so it is to be expected that we would change our financial declaration process. It was a question of justice.”

Last year, the company paid a tax bill of just €8.7 million, four times the amount paid over the two years before. This, it said, was because it had previously declared most of its revenue made in France to tax authorities in Ireland, except for business with “large clients”.

When this changed, revenue declared in France rose from €56 million to €747 million from 2017-2019, with the proportional amount owed in tax also increasing as a result.

However, calculations by Capital.fr suggest that the amount declared in 2019 was still almost half the real figure made in France, which is estimated at €1.3 billion for that year. This is calculated through user figures: the network has around 34 million users in France, and for each user, Facebook generates 44.14 USD per year - around €40.

The estimates therefore say that with a 35% margin, the company is likely to have made €500 million before taxes last year in France, and should therefore have paid €150 million in taxes - 17 times’ more than the actual amount paid last year.

Overall, in 2019, the company made 70 billion USD (€59 billion) worldwide.

Facebook says that its revenue per user in France is far lower than its global average of 35%, at just 4%. This explains its lower-than-expected payments, it said.

Tax changes

Speaking to business news source Capital.fr, Facebook said: “We take our fiscal obligations very seriously. We pay the taxes that we owe in all our markets, and we operate and work closely with financial administrations all around the world to respect the applicable financial laws, and to resolve all legal cases.

“Since 2018, we have changed our sales structure so that revenues generated by our users in France are recorded in this country. This year, we are paying €8.46 million in tax, an increase of almost 50% compared to last year.”

In February this year, Facebook founder Mark Zuckerberg said: “We understand that there is frustration about the way tech companies are taxed in Europe. We also want tax reform...and we accept that this may mean that we will have to pay more taxes and pay them in different places, in a new framework.”

France has long campaigned for new rules on the way digital companies are taxed in France and Europe, and has called for a coordinated effort between European nations.

Discussions on the subject are still underway at international intergovernmental economic body, the Organisation for Economic Co-operation and Development (OECD).

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