Facebook paid £4,327 corporation tax despite £35m staff bonuses
Staff at Facebook’s UK arm took home an average of more than £210,000 last year in pay and bonuses, while their employer paid just £4,327 in corporation tax.
Facebook made an accounting loss of £28.5m in Britain in 2014, after paying out more than £35m to its 362 staff in a share bonus scheme, according to the unit’s latest published accounts. Operating at a loss meant that Facebook was able to pay less than £5,000 in corporation tax to HM Revenue for the year.
The share scheme was worth an average of more than £96,000 for each member of staff. Once salaries were taken into account, a British employee of Facebook received more than £210,000 on average.
The level of tax contribution by Facebook, which claimed in 2013 that at least a third of UK adults visited its site every day, will add to the debate about how to ensure that multinationals make fair tax payments in each country in which they operate. Last year, Facebook made a profit on its worldwide operations of $2.9bn (£1.9bn), on revenue of $12.5bn. UK revenues were £105m last year.
John Christensen, the director of campaign group the Tax Justice Network, said: “it’s very likely they’re using all the usual techniques to shift profits around.”
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”. She added that all the firm’s employees paid UK income tax on their payouts.
Facebook recently secured the lease on a high-profile 227,324 sq ft office space in Rathbone Square, near Tottenham Court Road in London, where it plans to open a new headquarters in 2017.
George Osborne, the chancellor, has pledged to crack down on tax avoidance by global firms by swiftly legislating to enact a new set of rules drafted by the Paris-based Organisation for Economic Co-operation and Development (OECD), which has become a hub for global tax reform in recent years.
The so-called BEPS rules are aimed at cracking down on “base erosion and profit-shifting”: the practices used by many global firms to minimise their tax liabilities by recording profits in low-tax jurisdictions.
The chancellor has repeatedly cut corporation tax, which is levied on company profits, but he insists that in exchange all firms must pay their fair share to the exchequer. The main corporation tax rate was 28% when Osborne arrived at the Treasury, and is 21% today.
“Taxes should be paid where profits are made,” Osborne tweeted from the International Monetary Fund’s annual meetings last week. “Great to see OECD BEPS rules agreed here in Lima. UK will lead by example and implement early”.
Related: What is the ‘Google tax’?
Separately, the chancellor has introduced a diverted profits tax, known as the “Google tax”, aimed at preventing hi-tech international firms from minimising their tax liabilities in the UK.
Christensen said these developments were likely to have an impact on multinationals such as Facebook. “They will have to change their model. The Google tax will probably close off some opportunities, and the BEPS rules are certainly moving in the right direction.”
However, he criticised the fact that while the new framework will force firms to reveal to the authorities in their home country how much tax they pay in each jurisdiction in which they operate, that information will not be more widely available for public scrutiny.
The social and economic power of Facebook and its fellow Silicon Valley technology firms has come under increasing scrutiny in recent months.
Last week, the European court of justice struck down the 15 year old “safe harbour” pact, under which US-based companies were allowed to hold the data of European citizens. Fears about US surveillance activities, as revealed by the whistleblower Edward Snowden, have intensified concerns about the role of Facebook and other social media platforms in safeguarding their users’ privacy.
Max Schrems, the Austrian privacy activist who brought the case, described it as a “puzzle piece in the fight against mass surveillance, and a huge blow to tech companies who think they can act in total ignorance of the law”.
