Snapchat opts for London over Dublin for international HQ
Move could be a worrying indicator of investment trends post-Brexit, post-Beps
Snap, the company behind Snapchat, has opted to open its new new international headquarters in London, rather than Dublin, Amsterdam or Luxembourg, bucking a trend which for decades has seen US multinationals book their international sales in one of these FDI friendly locations.
The Financial Times reported on Tuesday that the Los Angeles-based messaging start-up, which opened its first UK office in 2015, will book all sales made outside the US in London. Initially, this will mean sales orginating in France, Australia, Canada and Saudi Arabia will be booked through the UK. Snapchat has more than 150 million daily active users worldwide, with about half of them outside the US.
“We believe in the UK creative industries. The UK is where our advertising clients are, where more than 10m daily Snapchatters are, and where we’ve already begun to hire talent,” said Claire Valoti, general manager of Snap Group in the UK. “The UK is where our advertising clients are, where more than 10 million daily Snapchatters are, and where we’ve already begun to hire talent.”
It’s a move which could furrow the brows over at the IDA, as Ireland has proved particularly adept at attracting emerging tech companies – and their European headquarters – to Dublin. Google, Facebook, Twitter and LinkedIn are just some of the stars of the tech world to have their EMEA or international headquarters in Dublin. While the move could be just a company specific decision, it may also signal how US multinationals companies might look to structure their international operations in a post-Brexit, post Beps world. And as such, could be a source of concern.
One of the key elements of the OECD’s efforts to restructure global tax rules is its Base-erosion and profit-shifting (Beps) process, which makes profit shifting – ie the movement of funds around the world to avoid tax – more difficult, as it seeks to better align business substance with taxable profits.
This may make Ireland a less attractive location for the type of tax structuring US multinationals had previously engaged in. Facebook for example, notably hit the headlines when it was revealed that it paid less in corporate taxes in the UK (just £4,327)than a British worker on average wages had paid in income taxes in 2014. The social media giant achieved this by booking UK sales through its Irish subsidiary, although it has since changed its approach.
While Snapchat has yet to turn a profit, and as such tax planning may not be a short-term priority, it is expected to go public this year with a valuation of up to $25 billion and so will likely have to start posting profits to please shareholders.
Speaking at the announcement of the IDA’s annual results last week, chief executive Martin Shanahan pointed to the uncertain outlook when he said he expected some US companies to delay investment announcements until details emerged of president-elect Donald Trump’s trade policies, while he also noted that competition from other jurisdictions for FDI has “never been as strong”.