Facebook Uses “Double Irish” Style

Reports showed that Facebook, the world’s largest social networking site, has used the “Double Irish” approach to pay little tax in the United Kingdom even though it made a whopping £840 million in 2011.

According to data, Facebook only paid £2.9 million or some $4.5 million.

Double Irish is a taxation strategy used by online companies like Google and Facebook to move big amounts of money, transfer them to their subsidiaries, and declare them as royalty payments. This means that when a UK advertiser buys an ad spot in Facebook UK, it is actually Facebook Ireland that receives the payment.

In 2011, Facebook Ireland is believed to have moved £750 million to the Cayman Islands and then reported a £15 million yearly loss. It also moved some money in Facebook US and declared this as royalty and licensing payments.

Facebook uses the same tax approach like Google and Abble. Starbucks and Amazon have also used the same approach, which allowed them to pay little taxes in the US.

The approach of these US-based companies has sparked anger in the United Kingdom as the country is a major source of income for them. Some quarters have even called for a boycott of Starbucks to push it to pay more taxes in the US.

A spokeswoman from Facebook, however, maintains that the company complies with all taxation regulations. It also said its international headquarters is in Ireland and the country was specifically chosen as headquarters because it is a great source to hire staff possessing the right skills.