Facebook is a special place. It is a place where one can counterfeit one’s personality, kick back in one’s designer living room and hang out with one’s broad circle of cyber-friends. It is a world of chimera, which is funny, because Facebook the company and its avant-garde executive team reside in a world of chimera themselves, a world parallel with their online kingdom, and every bit as fanciful.
You see, Facebook has hewn its own corporate reality. Facebook the company decided it didn’t want to be known as a large company any more. It didn’t even want to be part of a large company, so it applied to Australia’s corporate regulator and was duly granted a special exemption from being large.
We know you won’t believe this, so we cite the Class Order itself:
”384 Notification of Resol. By Directors of a Small Pty Company Controlled By a Foreign Coy Which is Not Part of Large Group.”
Yes, yes, we hear you. What of the small matter of Facebook’s market value being, ahem, $US172 billion ($183 billion)? What of its sales, at roughly $US10 billion? Whatever! Our authorities have deemed Facebook to be small. So small it is.
To dispel any notion that we may be engaging in satire here, let us defer to an accounting expert from the University of NSW, Jeff Knapp.
”The law made by our Federal Parliament is clear. Section 292(2) of the Corporations Act requires a small proprietary company that is controlled by a foreign company to prepare an annual financial report unless the company is consolidated in other financial statements that are filed in Australia.
But ASIC has changed the law through ASIC Class Order 98/98 giving relief to those companies that are part of a foreign-controlled group that is NOT large,” says Knapp.
There you have it; our regulator verily changed the laws of the land to fulfil Facebook’s fantasy of being small – and presumably to help it in paying no tax – like its idol, the golden calf of tax chicanery, Google.
”The foreign-controlled group must include any companies that carry on business in Australia and largeness is defined by the thresholds of $12.5 million in assets and $25 million in revenues,” says Knapp, pointing to last week’s Fairfax Media report citing Facebook Australia revenues of $60 million-plus. (Probably more like $200 million).
”Surely Facebook Inc or other companies it controls in tax havens are carrying on business in Australia. If the foreign-controlled group of Facebook Australia includes Facebook Inc and its tax-haven drones, then that group would appear to be large,” says Knapp.
”You might even call it a ginormous. But Facebook Australia has chosen a different reality and informed ASIC that it is not part of a large group. As a result, Facebook Australia has not filed any annual financial reports with ASIC for the years 2009 to 2013,” he says.
So that’s it! Facebook wanted to flee the reality of filing accounts. No matter that it proclaims, ”Giving people the power to share and make the world more open and connected.” No matter that it bombards us with unsolicited email touting friends we never knew; it was indignant this week at the proposition that it be open and connected.
A huffy PR operative told yours truly that, no, there would be no response to questions such as ”how many people work for Facebook in Australia?” It was a ”confidential business” thing, she said. And no, we could not speak with the boss, William Easton. Rack off.
Don’t get us wrong, we personally find Facebook quite useful, not for obtaining friends, but if one were trying to dig up a photo of a boiler-room type like, say, a financial adviser from Commonwealth Bank, one might find one on Facebook.
Anyway, our disclosure expert Jeff Knapp obligingly offered to review the Facebook account with ASIC. Here we go:
”Facebook opened its account – ACN 13401253 – and gave it the name Facebook Australia Pty Ltd. Date of birth was November 4, 2008. Facebook Australia started out with three friends: one shareholder, Facebook Inc. and two directors, Elizabeth Ann Houston, of Lisarow, NSW, and Michael Patrick Murphey, Maddison County, Illinois. Facebook Australia soon added another friend, BDO Corporate Secretarial Services, a specialist in the reporting requirements of the Corporations Act.
”On March 11, 2009, BDO put its name to a form 384 lodged with ASIC that Facebook Australia was not part of a large group. This form was processed by ASIC nearly 11 months later on January 28, 2010. Since then, nine more directors of Facebook Australia have resolved that the company is still not part of a large group.”
Facebook meanwhile is doing a rollicking ad trade in this country even though every entity connected to it is somehow unaccountable in our tax jurisdiction. Contracts are being signed in Australia but somehow the business isn’t actually happening here, says Knapp.
As Facebook founder Mark Zuckerberg once said: ”The biggest risk is not taking any risk … In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Clearly, ASIC and the Tax Office, along with Parliament House and Treasury, need to embark on the risk of doing something. Get connected. Awaken the giant within.
Or if all else fails, perhaps just do your job. Taxpayers are paying for it.