Global social network Facebook came under fire in the media over the revelation that it paid just £4,327 ($6,643) in corporation tax in 2014, according to its latest UK results filed at Companies House. However, Facebook UK also reported a pre-tax loss of £28.5m last year, even though the company paid its 362 UK staff a total of £35.4m in share bonuses. The BBC said Facebook paid less in tax than the ‘total of £5,392.80 in income tax and national insurance contributions [for an employee on the average UK salary of £26,500]’, adding that Facebook’s total global profits for 2014 were $2.9bn; while the FT said Facebook’s small UK corporation tax bill put the spotlight back on George Osborne’s diverted profits tax, dubbed the ‘Google tax’.
A spokesperson for Facebook said: ‘We are compliant with UK tax law, and in fact in all countries where we have operations and offices. We continue to grow our business activities in the UK.’
Andrew Watters, tax director at law firm Thomas Eggar, commented: ‘The Facebook organisation consists of more than one company based in more than one jurisdiction. UK corporation tax is paid by the UK company on profits. There are various legal ways to ensure that the corporate profits in a relatively high-tax jurisdiction are kept low. One of them is to pay lots of money to employees, although one would then expect an increase in non-corporate taxation.
‘The OECD is introducing new legislation to make it more difficult to “profit shift”. In the short term, a major concern of international organisations may be whether a legal lowering of the tax bill will be outweighed by the commercial consequences of reputational damage.’
Global social network Facebook came under fire in the media over the revelation that it paid just £4,327 ($6,643) in corporation tax in 2014, according to its latest UK results filed at Companies House. However, Facebook UK also reported a pre-tax loss of £28.5m last year, even though the company paid its 362 UK staff a total of £35.4m in share bonuses. The BBC said Facebook paid less in tax than the ‘total of £5,392.80 in income tax and national insurance contributions [for an employee on the average UK salary of £26,500]’, adding that Facebook’s total global profits for 2014 were $2.9bn; while the FT said Facebook’s small UK corporation tax bill put the spotlight back on George Osborne’s diverted profits tax, dubbed the ‘Google tax’.
A spokesperson for Facebook said: ‘We are compliant with UK tax law, and in fact in all countries where we have operations and offices. We continue to grow our business activities in the UK.’
Andrew Watters, tax director at law firm Thomas Eggar, commented: ‘The Facebook organisation consists of more than one company based in more than one jurisdiction. UK corporation tax is paid by the UK company on profits. There are various legal ways to ensure that the corporate profits in a relatively high-tax jurisdiction are kept low. One of them is to pay lots of money to employees, although one would then expect an increase in non-corporate taxation.
‘The OECD is introducing new legislation to make it more difficult to “profit shift”. In the short term, a major concern of international organisations may be whether a legal lowering of the tax bill will be outweighed by the commercial consequences of reputational damage.’
