US Tech Giant Lobbied Ireland To Use Digital Tax As Tax Credit Against Irish Profit

; posted on
June 4th, 2019

Facebook Inc. Senior Executives have conveyed their opinion to Ireland’s minister of finance in January about the possibility of offsetting proposed EU digital services taxes against the company’s Irish corporate tax liability.

Background

After an EU-wide proposal for a three per cent tax on certain digital revenues of multinational companies faltered late last year, France, Austria and other jurisdictions pushed ahead to introduce the tax on a national basis regardless of whether a consensus has been reached.

Digital service tax was introduced due to the relatively low amounts of corporate tax paid by companies such as Google, Amazon, and Facebook in EU countries. When opposition from some smaller member states, including Ireland, forced the commission to abandon the plan, several EU countries announced their own DSTs. Many U.S. technology companies have substantial operations in Ireland, which has the second-lowest corporate tax rate (12.5 percent) among EU countries, where Hungary’s 9 percent rate is the lowest.

Initial Revenue estimates indicated the EU-wide proposal could cost the exchequer €160 million a year, due to the large number of multinational tech firms who have their European headquarters in Dublin.

The digital tax will be imposed on a certain threshold of revenue where the technology’s user is located, not where the company’s headquarters is located. Since the digital tax is levied on sales in big markets, it was seen as likely to cut the profits they would declare for tax in Ireland.

Digital tax against Irish profit

The lobbying efforts took place during Minister of Finance Paschal Donohoe’s trip to Silicon Valley. Facebook officials inquired whether the payment of national digital sales taxes in some jurisdictions through its Irish subsidiary could be offset against Irish tax. The senior executives argued that the credit is required, as the companies should not be taxed twice on the same service in two different jurisdictions.

Source: Irish Times

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