Facebook announces ad revenue reroute: When Irish eyes are crying

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Facebook today said it is shifting to a "local selling structure" in countries outside the US, in which its advertising revenue in that country will be recorded by their local company in the country.

"We believe that moving to a local selling structure will provide more transparency to governments and policy-makers around the world who have called for greater visibility over the revenue associated with locally supported sales in their countries", Facebook CFO Dave Wehner said in a blog post today.

Last year, Facebook began recording revenues for United Kingdom sales in Britain, resulting in a modest increase in the tax it paid there.

Social media giant Facebook has caved into pressure from governments and the general public and is to overhaul its tax structure. In the USA, the company is locked in a battle with the Internal Revenue Service that may cost it more than $5 billion, plus interest and penalties, related to global operations that are reported by the Irish unit. The European Commission has taken a hard stance against what is considers to be unfair tax practices, and last week the commission forced Apple Inc.to sign an agreement to pay $15 billion in back taxes to the Republic of Ireland. Its headquarters in Menlo Park, California will be its U.S. headquarters and the offices in Dublin will be the site for its global headquarters.

The announcement comes as policymakers push digital companies - many of which have set up shop in low-tax countries like Ireland and Luxembourg - to be more transparent about where they pay corporate tax.

Wehner said that this change will "require significant resources" to implement fully since each country has unique laws and expectations. The company lowered its tax bill further by paying large royalties to companies resident in the Cayman Islands, shifting much of the profit from Dublin to the tax haven.

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