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Facebook Faces Scepticism After Welcoming G7 Global Tax Rule Reforms

Facebook's vice president for Global Affairs, Nick Clegg, said that Facebook welcomes the reforms made for the global tax rules during the recent G7 summit. However, some members of the public are not too convinced by his statement.

In a tweet on 2 June 2021, Clegg mentioned that the reforms made during the summit were "a significant first step" towards stronger public confidence in the global tax system as well as certainty for businesses. He also added that the reforms will enable Facebook to pay more taxes in different places.

The recent G7 summit agreed on a US proposal that corporations around the world will be required to pay a minimum of 15% tax on profit. CNBC reports that if the reforms are finalised, the profit margins of the world's largest companies would be affected by at least 10%.

However, Clegg's tweet was met with scepticism and ridicule some hours after his tweet was published.

Several comments on Clegg's tweet pointed out Facebook's inconsistencies when it comes to paying taxes. One such tweet even cited a report from the BBC stating that Facebook, along with Google and Microsoft, is avoiding paying taxes in poorer nations. The report also mentions a statement from ActionAid, an international charity that works with women and girls living in poverty, that the amount of unpaid taxes could've been used to tackle the COVID-19 pandemic.

The company's tax avoidance goes as far back as 2012 when The Guardian revealed that Facebook only paid £2.9 million in tax on profits of more than £800 million. Facebook was able to do so by channelling the company's profits outside of the US to its subsidiary in Ireland.

The IRS building in Washington, D.C. Credit: Getty Images

More recently, the US Internal Revenue Service (IRS) sued Facebook for US$9 billion in unpaid taxes. The IRS alleged that Facebook undervalued the intellectual property it sold to its Ireland subsidiary, which enabled the company to dodge billions in taxes. This was due to Ireland's lower corporate tax rates compared to the US, something that was taken advantage of by not just Facebook, but also Google and Apple.

The Guardian also reported in December 2020 that Facebook has decided to close its Ireland subsidiary "as part of a change that best aligns with [their] operating structure."


Written by John Paul Joaquin

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