Worldwide Facebook Inc is estimated to have 2.01 billion monthly active users, with est. 1.7 billion of these users living outside of the USA and Canada.
Australian users comprised 17 million of these account holders in August 2017 - 12 million logging in daily.
In pursuit of profit this social media company is a ruthless data miner – collecting and collating information about every available aspect of the lives of all holders of Facebook accounts.
A fact that makes this company’s users a target of US federal government mass surveillance.
Given that Facebook Inc created a holding company Facebook Ireland Ltd in the low-taxing Republic of Ireland and it is this company which appears to legally possess the data of those est.1.7 billion users, it now finds itself before European Union courts.
Privacy activist @maxschrems, 3 October 2017:
Facebook operates its international business outside of the United States and Canada via a separate company in Ireland called “Facebook Ireland Ltd”. 85.9% of all worldwide Facebook users (everyone except USA and Canada) are managed in Dublin (Link), which is understood to be part of Facebook’s tax avoidance scheme.
Facebook currently sends all user data to its parent company, “Facebook Inc.” in the United States for processing. European law (Articles 25 and 26 of Directive 95/46/EC) requires that data can only be transferred outside of the EU if the personal data is “adequately protected”. This is in conflict with US mass surveillance laws, which “Facebook Inc.” in the USA is subject to.
Max Schrems: “In simple terms, US law requires Facebook to help the NSA with mass surveillance and EU law prohibits just that. As Facebook is subject to both jurisdictions, they got themselves in a legal dilemma that they cannot possibly solve in the long run.”
The Data Protection Commissioner in Ireland is investigating a complaint made by Max Schrems, an Austrian student with a Facebook account. This complaint relates to the transfer of his data by Facebook Ireland to Facebook Inc. in the United States for processing - an act which is alleged to violate European fundamental rights under Articles 7, 8 and 47 of the European Charter of Fundamental Rights.
The Data Protection Commissioner had been previously taken to the Court of Justice of the European Union in relation to refusal to investigate a complaint made by Mr Schrems regarding the fact that Facebook Ireland Ltd (‘Facebook Ireland’) transfers the personal data of its users to the United States of America and keeps it on servers located in that country.
The subsequent investigation by the Data Protection Commissioner has given rise to a High Court case in Ireland (3 October 2017 judgement). The Court has now referred the issue of the validity of the European Commission’s Standard Contractual Clause decisions to the Court of Justice of the European Union for a preliminary ruling.
History of the Case according to Max Schrems:
The case is based on a complaint, filed by Mr Schrems against Facebook in 2013:
* The case is based on a complaint [PDF] brought by Mr Schrems against Facebook Ireland Ltd. before the Irish Data Protection Commissioner (“DPC”) in 2013 (4 years ago).
* The DPC first refused to investigate the complaint, calling it “frivolous”, but Mr Schrems subsequently succeeded before the CJEU, which overturned the “Safe Harbor” (a EU-US data sharing system) in 2015 [case C-362/14] and ruled that the DPC must investigate the complaint.
* After the invalidation of “Safe Harbor”, Facebook used another legal tool to transfer data outside of the EU, called “Standard Contractual Clauses” (SCCs) [Facebook’s SCCs - PDF].
* SCCs are a contract between Facebook Ireland and Facebook USA, where Facebook USA pledges to follow EU privacy principles [official EU Info Page].
* The case subsequently continued with an updated complaint [PDF] in 2015. The Irish DPC joined Mr Schrems view that the SCCs cannot overcome fundamental problems under US surveillance laws, and specifically agreed that there is no proper legal redress in the United States in such cases. Other issues raised in Mr Schrems complaint have not been investigated yet.
* The DPC refused to use its power to suspend data flows of Facebook as asked by Mr Schrems.
* Instead of only prohibiting Facebook’s EU-US data transfers under Article 4 of the SCCs, the DPC took the unusual move of issuing proceedings against Facebook Ireland Ltd. and Mr Schrems before the Irish High Court. In the procedure the DPC aims to invalidate the SCCs entirely by referring the case to the European Court of Justice (CJEU) in Luxembourg.
*The case was heard for five Weeks in February 2017. The United States Government was joined as an “amicus” to the case, along two industry lobby groups and the US privacy non-profit “EPIC”.
Facebook Inc’s "Double Irish" tax avoidance scheme and other matters also saw it before a US court in 2016, having refused to comply with a number of IRS tax summons. The court case continues to date.
The IRS 2008-2010 audit of Facbook Inc resulted in an assessment of the intangible assets transferred in those years having a value of US $13.8 billion, increasing Facebook's 2010 income by US $84.9 million and causing an income tax deficiency for the parent company.
Excerpt from United States Securities And Exchange
Commission filing
by Facebook Inc for the quarterly period ended June 30, 2016:
We
are subject to taxation in the United States and various other state and
foreign jurisdictions. The material jurisdictions in which we are subject to
potential examination include the United States and Ireland. We are under
examination by the Internal Revenue Service (IRS) for our 2008 through 2013 tax
years. Our 2014 and subsequent years remain open to examination by the IRS. Our
2011 and subsequent years remain open to examination in Ireland. We do not
anticipate a significant impact to our gross unrecognized tax benefits within
the next 12 months related to these years. On July 27, 2016, we received a
Statutory Notice of Deficiency (Notice) from the IRS relating to transfer
pricing with our foreign subsidiaries in conjunction with the examination of
the 2010 tax year. While the Notice applies only to the 2010 tax year, the IRS
states that it will also apply its position for tax years subsequent to 2010,
which, if the IRS prevails in its position, could result in an additional
federal tax liability of an estimated aggregate amount of
approximately $3.0 - $5.0 billion, plus interest and any
penalties asserted. We do not agree with the position of the IRS and will file
a petition in the United States Tax Court challenging the Notice. If the IRS
prevails in the assessment of additional tax due based on its position, the
assessed tax, interest and penalties, if any, could have a material adverse
impact on our financial position, results of operations or cash flows. [my yellow bolding]
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