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12 Oct 2015 10:28am

Facebook criticised over tax bill

Facebook paid just £4,327 in UK corporation tax last year, despite paying British staff an average of more than £210,000

According to the latest company accounts for Facebook UK Limited, the web giant paid less than £5,000 in corporation tax in the last financial year, even though it paid £35.4m to London-based staff.

This pushed the company into an accounting loss of £28.5m, resulting in a reduced tax bill. Last year, Facebook’s global profits measured £1.9bn and UK revenues hit £105m, according to a report in the Sunday Times.

Meg Hillier, new chair of the Public Accounts Committee (PAC), said over the weekend, “It’s another example of a large multinational running rings around the tax laws. At the PAC we are keen to make sure the taxpayer gets its dues so these are issues we will continue to pursue.”

For years, Facebook UK has courted controversy in relation to its UK tax affairs, and Hillier’s words mirrored those of her predecessor, Margaret Hodge. In October 2013 Hodge blasted Facebook for paying no corporation tax despite turnover of £34.6m.

Indeed, many have pointed out that Facebook’s £4,327 tax bill is less than that of the average British worker. The average annual salary currently sits at £26,500, resulting in income tax payments of £3,108 and £2,213 in national insurance contributions.

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 in the UK.”

Facebook moves its international profits through the Irish tax authority. Any businesses buying advertisements on Facebook outside of the US pay Facebook Ireland. Profits are then channelled to a sister organisation in the Cayman Islands, a jurisdiction that does not levy corporation tax.

The news comes at a time where tax jurisdictions from all over the world are gearing up to tackle base erosion and profit shifting (BEPS). Last Friday, Paris-based think tank the Organisation for Economic Co-operation and Development (OECD) presented its plans to fight BEPS to G20 finance ministers in Lima.

The G20 – which includes the UK – endorsed the recent package of 15 action points to curb tax avoidance by multinational enterprises.

Oliver Griffin

 

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