Facebook Australia cops AU$31m income tax adjustment from ATO

The social network has seen its AU$33 million pre-tax profit disappear under a AU$42 million tax bill.

Facebook and Cambridge Analytica: Is the genie out of the bottle? Marc Rotenberg, president at Electronic Privacy Information Center and adjunct professor of law at Georgetown University, discusses why people who voluntarily put their information on the internet should still expect privacy.

After signing a settlement with the Australian Taxation Office (ATO) in October, Facebook Australia has been hit with a AU$31.3 million tax adjustment reaching back to the company's 2009 financial year.

Disclosed in its earnings filed with the Australian Securities and Investments Commission (ASIC), Facebook paid AU$42.4 million in income tax for its financial year ended December 31, 2017, of which AU$11.6 million was based on the current year, and the remainder an adjustment on its tax obligations between 2009 and 2015. For its 2016 fiscal year, the company paid AU$6.3 million in income tax.

Of its other headline figures, the social network posted a more than AU$150 million boost in revenue, taking its online advertising sales to AU$479 million, compared to AU$326 million a year prior.

Profit before income tax came in at $32.9 million, with the company ending up with a AU$9.6 million loss after the income tax payments were made. For the 2016 year, pre-tax profit was AU$6.3 million, and post-tax profit was $3.3 million.

During the year, Facebook Australia received a AU$50 million equity injection from Facebook Global Holdings, and, thanks to its tax bill, the company now has $11 million in accumulated losses for future periods.

At December 31, the company held AU$26.5 million in cash or cash equivalents, representing an increase of AU$10.7 million.

In September last year, the company revealed that a majority of its revenue raised in Australia is booked overseas.

For 2016, the company booked AU$327 million of revenue from Australians locally compared to AU$492 million booked overseas.

See: A regulation straitjacket is no less than Facebook and everyone else deserves

Facebook had previously told the Senate Standing Committee on Economics that it only books revenue in Australia that was derived from Facebook's local sales team in Sydney and Melbourne, and did not include Australian companies or people who bought ads on the social site without interacting with the local sales arm.

At the same time, the ATO explained that Facebook's behaviour is not against any laws.

"They have a presence in Australia, and the sales that that presence directly supports must be returned in Australia -- that's how the MAAL [multinational anti-avoidance laws] works. It says if you have sales that are going offshore, and you have activities in Australia, and those activities directly support those sales, then you must return those sales in Australia," ATO deputy commissioner Mark Konza said in August.

"However, the converse must also be true, obviously, senator, and that is if you have some of your sales which are not being directly supported, then you are under no obligation to return them in Australia."

Last week, its global parent company delivered its first set of results since the outbreak of the Cambridge Analytica data scandal, posting net income of $5 billion from revenue of $11.96 billion for its first quarter.

"Despite facing important challenges, our community and business are off to a strong start in 2018," said Facebook CEO Mark Zuckerberg.

"We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together."

The company's next quarter is likely to show whether there has been any fallout from the ongoing privacy scandal.

Earlier this month, Facebook moved non-European users that could have fallen under the protections of Europe's data protection laws away from its Ireland business.

The change hit more than 70 percent of Facebook's 2 billion-plus members. As of December, Facebook had 239 million users in the United States and Canada, 370 million in Europe, and 1.52 billion users elsewhere.

Also read: How Europe's GDPR will affect Australian organisations

In a statement, Facebook played down the importance of the terms of service change.

"We apply the same privacy protections everywhere, regardless of whether your agreement is with Facebook Inc or Facebook Ireland," the company said.

Facebook chief executive Mark Zuckerberg earlier this month said his company would apply the EU law globally "in spirit", but stopped short of committing to it as the standard for the social network across the world.

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