Five million Swedes, or half of the Nordic country’s population, love Facebook. Their love, however, remains largely unrequited by the social media giant, which is doing its utmost to pay as little taxes in Sweden as possible, despite having received millions in state support.
In recent years, Facebook has collected SEK 139 million ($16.5 million) in grants from the Swedish state to place its servers on Swedish soil. The recent batch of the Paradise Papers revealed however that the social media giant used a tax-dodging scheme called “Double Irish” to “optimize” its income, Swedish national broadcaster SVT reported.
According to the Paradise Papers, Facebook is one of the customers at Appleby’s office on the Cayman Islands. The islandsare one of the world’s foremost tax heavens.
Tobias Lindberg, chief analyst for the news media trade organization Newspaper Publishers, estimated that Facebook picked up SEK 1 billion ($120 million) from the Swedish advertising market last year alone — without paying a single krona in taxes.
Instead, advertising revenues go straight to Ireland, where Facebook effectively sidesteps taxation through a loophole. According to invoices in Sweden, a large part of the money raised via advertising is funneled between various Facebook subsidiaries. Ultimately, the money ends up with Ireland Limited, which in turn pays royalties to a sister company, which is registered on the Cayman Islands, where Facebook does not pay a single cent in taxes. This is not illegal, but upon discovery it has predictably angered Swedes.
“They comply with all the laws and regulations, they behave themselves and do as they should. In practice, it’s the laws that adversely affect the Swedish media and favor foreign media platforms,” Tobias Lindberg said.
According to Lindberg, there was a certain moral aspect about Facebook’s proceedings.
“In the long run, it is not sustainable to actively avoid taxes and not do the right thing. In the long run, I absolutely think it is an immoral act,” Lindberg said, calling Google and Facebook the “biggest winners” as they are exempt from taxation where their main profits arise.
The 2013 deal on a server hall in the city of Luleå in northernmost Sweden was hailed as “strategically important” by none other than the Swedish government. Facebook founder Mark Zuckerberg himself called subpolar Luleå an “optimal place” due to its cold climate. The company’s appetite was whetted by lavish government support in hopes that it would promote both the region in particular and Sweden as a whole.
When confronted by SVT, a Facebook representative claimed that over SEK 10 billion ($1.2 billion) has been invested in the Swedish servers, which also generated hundreds of jobs in Luleå alone.
“We are determined to play a positive role in the communities we are active in and we will continue doing so in Luleå,” the Facebook representative said.
Former Swedish Industry Minister Annie Lööf of the Center Party, who signed the deal on financial support for Facebook, does not consider the company’s methods immoral, yet argued a discussion on multinational corporations’ tax breaks was needed. According to her, the establishment support did not only benefit Facebook, but the whole region of Norrland.