Social-media company Facebook has agreed to pay $125 million in back taxes to the government of France to settle an investigation. Tax officials in France started looking at Facebook's taxes in 2012 after allegations the company had broken laws.
After the settlement Facebook said in a statement it took its tax obligations seriously and was willing to work with authorities in the countries where it operated. The company said it was always striving to comply with all applicable tax laws - and that was why it agreed to the deal in France.
Facebook said it had revamped its selling structure in France to make sure revenues generated there would be recorded in the country. It said that following this action the company was now paying around 50 percent more in taxes. The increased amount coincides with revenue growth of Facebook's business in the country - which jumped to $460 million in 2018 from around $66 million in 2017.
Following the investigations - and a raid on the company's Paris offices - Facebook was accused of deliberately avoiding taxes between 2009 and 2018. Investigators reportedly found the company was funneling some of its sales in France to subsidiaries in other countries in Europe. This lowered the company's effective tax rate in France.
Legal experts said Facebook's alleged funneling of sales to different countries was technically legal because there were no laws prohibiting the practice. Funneling - which is considered to be a gray area by legal experts - is hard to prove because a company is obliged to pay taxes only if a transaction is proven or classified as a contract within a specific country: in this case, a contract made in France.
France officials have targeted multinational companies that have used funneling to decrease tax obligations. Authorities have mostly been looking at technology companies that have generated billions of dollars of revenue and profit in the country. Last year, Google was forced to pay a fine of $549 million and $510 million in back taxes. Apple settled a dispute by agreeing to pay $572 million in back taxes.
