Zuckerberg's pledged Facebook donation arouses skepticism in Europe

Facebook founder Mark Zuckerberg and his wife, Priscilla Chan, announced they would be donating 99% of their shares in Facebook, an amount currrently worth $45 billion.

By Erik Kirschbaum

Dec. 4, 2015 3:17 PM PT

Reporting from BERLIN — Mark Zuckerberg and his wife’s pledge to donate 99% of their Facebook shares during their lifetimes has met with frosty reserve in Germany, Britain and other parts of Europe where the company has a reputation for paying little tax.

Concern that Zuckerberg was using philanthropy to avoid taxes echoed louder in European capitals than any admiration for his gesture to donate the shares — currently worth $45 billion — which was announced Tuesday via a letter to his newborn daughter Max.

In Germany, one of the 10 most popular countries for Facebook with 22 million users as of 2014, there was skepticism about Zuckerberg’s pledge — and not only because donations for charity are rare and Germans tend to have a heavy reliance on the state. The social media platform reportedly paid $240,000 in taxes last year in Germany.

SIGN UP for the free California Inc. business newsletter >>

Many Germans, wary of individuals with too much power, would rather see the state distributing — and redistributing — wealth through tax collection and public expenditures than a tycoon dispersing his wealth as he sees fit.

“Zuckerberg has so much wealth because Facebook uses tricks to evade taxes every day,” said Markus Preiss in a scathing commentary for Germany’s top-rated Tagesthemen news broadcast.

“His company is actively taking away the financial basis from countries around the world, which he says he wants to make a better place, by paying so little tax,” Preiss said. “He’d do more to save the world if Facebook would simply pay its fair tax without the tricks.”

Zuckerberg, who is the world’s 16th wealthiest person and America’s richest entrepreneur under 40, said in the letter that he and his wife, Priscilla Chan, wanted to help make a better world for their daughter and her generation. It also challenged young billionaires to follow suit.

In another statement, posted on his Facebook page Thursday, Zuckerberg said he and his wife would get no tax benefit from setting up a limited liability company for their philanthropic endeavor. “Just like everyone else, we will pay capital gains taxes when our shares are sold by the LCC,” he wrote.

A spokeswoman for Facebook in Europe also denied any suggestions that Facebook was avoiding taxes, saying the company takes its tax obligations seriously. “We are compliant with tax laws in all countries where we have employees and offices,” she said in a statement. “We continue to grow our business activities in Europe.”

Nevertheless, the donation announcement generated some criticism about such pledges.

“There is a dark side to this trend,” wrote the Daily Mail newspaper in London. “For behind it lies the sanctimonious hypocrisy of billionaires who build vast fortunes with firms that avoid the taxes paid by the rest of society, then arrogantly think they are best placed to solve the planet’s problems.”

“Zuckerberg talked in his letter of creating stronger communities,” the Daily Mail wrote, saying that Facebook had paid $6,553 in taxes in Britain last year. “Yet Facebook, like too many technology behemoths, is a serial tax avoider undermining government through its stubborn refusal to pay its fair share to society.”

See the most-read stories this hour >>

Corporate taxes and supplementary wage costs in European countries can be much higher than in the United States. In exchange for higher taxes, governments in the European Union pay for more services. The practice of “aggressive tax planning” pursued by non-EU companies, in particular from the United States, has become increasingly frowned upon.

Facebook, like other U.S. companies, bases its European operations in Ireland, where taxes have been traditionally low to lure companies from inside and outside the EU. But the mood is changing in Ireland as well.

“In the case of Facebook, one of the reasons that Zuckerberg’s stake is worth [$45 billion] is that in line with the best corporate practice it pays as little tax as possible,” wrote columnist John McManus in the Irish Times on Thursday.

“For some at least, this sociopathic approach to paying corporate tax takes the gloss off his announcement,” McManus wrote. “The argument goes that at least some of this money is in effect revenue that should have gone to the governments of the various countries in which Facebook makes its profits. And those governments should get to spend it in line with whatever mandate they were given by their electorates.”

Kajo Funke, a political scientist at Berlin’s Free University, said it’s commendable that Zuckerberg wants to donate most of his wealth, and he hopes that his intentions are genuine.

“It’s a perfect fit — if the money is used for good causes,” Funke said. “I won’t join the ranks of those deriding him for this. But if it were an avenue to avoid taxes, that would be an outrage.”

Some people in Germany defended Zuckerberg’s effort. The conservative Die Welt newspaper described Germans as notoriously envious of anyone who accumulates wealth and called it typical that so many are criticizing Zuckerberg’s philanthropy.

“In Germany, every TV star, editor in chief or company executive learns that they’ll only face poisonous attacks and envy if they try to do something good,” wrote Die Welt. “So the hyper philanthropist is sadly going to remain an American phenomenon. There are too many influential people in Germany who hate anyone with money.”

Kirschbaum is a special correspondent.

ALSO

San Bernardino shooting video showcases Snapchat’s quirks as a news source

YouTube seeks streaming rights to TV shows and movies to bolster Red subscription service

Thanks to Google, now you can watch 360-degree videos of ballets, operas and symphonies