Business Irish

Thursday 28 August 2014

Facebook's Irish operation nets €1bn – but pays just €3m in tax

Accounts reveal quadrupling of revenue as row erupts over Instagram photo rights

Gordon Deegan and Peter Flanagan

Published 19/12/2012 | 05:00

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Photo: AP

FACEBOOK'S Irish operation paid only €3.23m in corporation tax last year, even as revenues at the company surged past the €1bn mark.

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Accounts just filed for Facebook Ireland Ltd show turnover more than quadrupled from €229m to €1.051bn during 2011.

Despite that, the firm slumped to a loss of €18m – a year after recording a €1.8m profit.

Facebook, like a number of US firms operating here, uses a perfectly legal tax avoidance technique known as the "Double Irish" which sees the company pay royalties to another company, usually based offshore.

In this case, Facebook Ireland Ltd paid Facebook Ireland Holdings for licence expenses relating to the use of the Facebook Platform. Those royalties topped €1bn in 2011, compared to €221.6m in 2010.

The accounts show that staff and executive directors received shares worth €13.95m during the year, however, €5.9m of these went to unidentified key management personnel.

Last year was the final full year for Facebook as a private company. Mark Zuckerberg's social network floated in May at a valuation of close to $100bn (€75.5bn). The company is now worth about $60bn.

The quadrupling of revenue came from the Dublin-based company "billing third-party customers for online advertising on the Facebook website" for the 12 months of 2011 compared to four months in 2010, Facebook added.

The Irish business now accounts for some 40pc of the network's global revenue.

Costs for the 287 staff and executives at the firm last year totalled €35.6m. That includes €17.2m in salaries and the share-based payments, though the amount does not include emoluments to directors – they are paid by Facebook Inc.

On average, the Dublin staff took home total compensation including shares worth more than €59,300. Earnings for "key management personnel" increased from €644,000 to €1.58m.

Accounts also disclose that the firm received a capital contribution of $300m from its immediate parent, Facebook Ireland Holdings, in February.

The publication of Facebook's Irish accounts overshadowed a huge row that has broken out among users of Facebook's photo sharing site Instagram, after the firm changed its privacy policy.

The revised policy, released on Monday, allows Instagram to sell a user's photograph without their consent.

That means a person's photo could be used in advertising without their knowledge.

The changes make no provision for photos that include people's faces and pictures of children could be used as easily as those of adults. The only way to not abide by the new policy is to delete your account.

Facebook bought Instagram in a multi-million dollar deal earlier this year and had made clear it would look to monetise the site to a much greater degree than it had been.

In Europe, Facebook is regulated by the Data Protection Commissioner here. Last night, however, a spokesman for the DPC said that as Instagram was a separate entity based in the US, it had no plans to investigate the matter.

Irish Independent

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