'Immoral' Facebook paid less than 1 percent tax in U.K.

The social networking giant paid less than 1 percent of its 2011 revenues in tax, according to latest figures, adding yet another company to the long list of firms that are accused of tax avoidance schemes.
Written by Zack Whittaker, Contributor

First Amazon was in the spotlight for allegedly avoiding paying tax, then Google and Apple felt the brunt of the British public when they were next accused. And now it's Facebook's turn to face the wrath.

Image credit: Spencer E Holtaway/Flickr.

The world's largest social network, which recently hit 1 billion users active worldwide, is accused of "taking the British taxpayer for a ride" after experts said the company had depressed sales figures in order to pay less tax in the country. The company's average U.K. employee earner more in 2011 than the entire company paid the U.K. Treasury. (Correction: Facebook has said this figure is "not accurate".)

On U.K. revenues of £20.4 million (32.6m), Facebook paid only £195,890 ($313,000) in U.K. tax in 2011. Its average employee earned £275,000 ($440,000).

Why? Though Facebook has a U.K. base, most of Facebook's U.K. sales run through Ireland where corporation taxes are far lower. The Guardian estimates that around 11 percent of Facebook's total sales made in the U.K. are actually declared in the country. 

Both Google and Apple were criticized for spending only a fraction of their 2011 annual fortunes on paying their tax bills in the U.K.

By comparison, Apple's U.K. operations brought in £6 billion ($9.5bn), but the firm only paid £10 million ($15.9m) in tax. Google paid only £6 million ($9.6m) on U.K. revenues of £395 million ($632.8m). And frankly, the U.K. Treasury isn't too happy about it. 

Apple paid less than 1 percent tax; Google paid less than 2 percent, while Facebook only paid less than 0.001 percent in tax, according to my rough calculations.  

British member of Parliament (MP) John Mann, who had previously called on Google to face a U.K. parliamentary panel over its alleged tax avoidance scheme, said firms like Facebook were "disingenuous and immoral" for paying only a fraction of their profits in tax where the companies are based, reports The Telegraph.

Strangely enough, Facebook reported a pre-tax loss of £13.9 million ($22.2m) loss against a £1.1 million ($1.7m) profit in 2010.

Facebook told The Guardian in a statement: "We have our international headquarters in Ireland that employs hundreds and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe."

That being an entire 'non-answer," of course. Many companies employ such tax avoidance mechanisms by setting up a base in a high-tax residency, but employing much of the company in a lower tax area while paying commission back to the U.K. 

Facebook did not respond to questions at the time of writing, but told The Telegraph that the U.K. tax situation does "not necessarily present a full account of overall global financial performance".

With over 1 billion active users and an advertisement revenue stream expected to hit $5.8 billion in 2012, according to forecasts, you can bet your bottom dollar that it doesn't add up.

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