Facebook agrees to pay France €106m in back taxes

Eiffel Tower and mobile phone

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Facebook agreed to pay the French government 106 million euros (95.7 million pounds) in back taxes to settle a dispute over the country’s earnings.

The payment covers the last decade of its activities in France since 2009.

The social media giant has also agreed to pay 8.46 million euros in revenue taxes in France for 2020, 50% more than in 2019.

“We pay the taxes we owe in every market we operate in,” a Facebook spokesperson said.

“We take our tax obligations seriously and work closely with tax authorities around the world to ensure compliance with all applicable tax laws and to resolve any disputes, as we have done with the French tax authorities.”

The social networking giant hasn’t shared the details of the tax dispute, but France has pushed tech companies to pay more taxes within the country where it is generated.

Other tech giants like Google, Apple, and Amazon have reached similar deals with the French tax authorities.

Facebook said that since 2018 it has changed its sales structure so that “the income of advertisers supported by our teams in France is recorded in this country”.

The BBC understands that Facebook paid a tax rate in France of 38% in 2019, which is higher than the statutory income tax rate of 33.3%.

In February, Facebook boss Mark Zuckerberg said he acknowledged the public’s frustration with the amount of taxes paid by the tech giants.

He added that Facebook has accepted that it may have to pay more taxes in Europe “in different places according to a new framework” in the future, and has supported the Organization for Economic Co-operation and Development (OECD) think tank’s plans to find a solution on how to tax tech companies.

New digital taxes

Facebook has been accused of not paying its fair share of taxes in the countries it operates in.

Last year, France announced a new digital services tax for multinational tech companies, but in January the country said it would delay the tax until the end of 2020.

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Image caption

Facebook boss Mark Zuckerberg testified before the US House Judiciary Committee in July on antitrust concerns

The new tax would have required global tech giants to make tax payments equivalent to 3% of their French revenue twice a year in April and November.

In response to France delaying the new tax, the US has said it will not impose retaliatory tariffs on $ 2.4 billion (£ 1.8 billion) of French goods, including champagne and cheese.

The OECD is working on a multilateral agreement on how tech giants should be taxed by governments.

In the UK, Facebook only paid £ 28.5m in corporate tax in 2018, despite generating a record £ 1.65bn in UK sales.

The UK government implemented its technology company tax in April. The Digital Services Tax (DST) requires digital services operating in the UK to pay a 2% tax in relation to social media services, internet search engines and online marketplaces.

HM Treasury stressed that the tax will remain in effect until a comprehensive solution is agreed to tax the tech giants.

In June, Chancellor Rishi Sunak and the finance ministers of France, Italy and Spain signed a letter stating that tech giants like Google, Amazon and Facebook must “pay their fair share of taxes.”

In the letter, obtained by the BBC, the four finance ministers told US Treasury Secretary Steven Mnuchin that the pandemic had increased the need for such levies.

“The current Covid-19 crisis has confirmed the need to provide a fair and consistent distribution of the profits made by multinationals that operate without – or with little – taxable physical presence”, reads the letter.

“The pandemic has accelerated a fundamental transformation in consumer habits and increased the use of digital services, thereby strengthening the dominance of digital business models and increasing their revenues at the expense of more traditional businesses.”

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