Briefing

Facebook failed to report 500 million yen in taxable income earned in Japan

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The company paid its advertising revenues earned in Japan to its branch in Ireland—where the corporate tax rate is 12.5 per cent compared to Japan’s 30 per cent—a violation of Japan’s tax laws. Facebook has since remitted more than 150 million yen (about $1.3 million) in taxes and penalties to rectify the violation, which occurred over two years from 2015 and 2017. Facebook said the company is “cooperating with taxation authorities to comply with legal regulations in each country.” (Japan Times)

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Talking point: Many countries, including Canada, do not require Facebook to collect and remit taxes in the country where digital sales are made. While Japan does require this, its tax authorities have expressed difficulties in keeping the social media company and other tech giants compliant. In January, Japanese tax authorities found that Google failed to declare about US$32 million in income earned in the country in 2015 by transferring it to Singapore. There’s a growing international push to tax digital companies, as well as standardize those taxes so companies can’t park revenues from one country in another that has lower tax rates. The OECD, for example, plans to create a global tax for foreign-based tech companies that all member states, including Ireland, will implement simultaneously. The OECD is aiming to have a draft of the law complete by the end of 2020.