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Facebook paid £4,327 corporation tax in the UK in 2014

• elicox 11y ago
  I don't know if is the case of Facebook, but in general this is the story of most of tech companies, all are located in Ireland where they pay so much less taxes, and in rest of EU countries all this big companies pay this quantities or in the worse case the government return money. EU is totally broken, one market with one tax per country; Obviously, all companies go to the country with less taxes. And the different is not 1% or 2% is like 10% or more.
  • rmc 11y ago
    > all are located in Ireland where they pay so much less taxes Another reason for Ireland was that there was a very lax view of European Data Protection law there.
• bnastic 11y ago
  My one-man-show consultancy pays far more than that in UK corporation tax. Of course that pisses me off, regardless of how you paint this whole tax avoidance scheme. Someone said that "paying tax is for poor", and this goes a long way to support it.
  • scanr 11y ago
    An alternative point of view: if your one-man-show consultancy was not IR35 compliant, paying corporation tax instead of NI and PAYE (i.e. salary) would be a sign that you're avoiding tax.
• deleted 11y ago
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  • deleted 11y ago
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  • psykovsky 11y ago
    What about when your government becomes worst than, say, Saudi Arabia?
• maccard 11y ago
  > Its most recent Companies House filing shows the company as making a pre-tax loss of £28.5m last year, but the firm also paid its 362 UK staff a total of £35.4m in share bonuses. So £35m was distributed as income towards the employees. This means the employees are paid extra, have more money to contribute and spend locally, and have paid the correct income taxes on the bonuses. How is this a bad thing?
  • dazc 11y ago
    How is this a bad thing? Because the amount of corporation tax paid makes a better headline?
  • crdoconnor 11y ago
    Ah, trickle down economics!
  • DanBC 11y ago
    Facebook reaps the rewards of the UK infrastructure. Facebook should behave as a responsible citizen and help fund that infrastructure. If they don't want to behave like responsible citizens they can fuck off.
    • baddox 11y ago
      As the parent commenter said, they are helping fund infrastructure by paying their employees a lot of money, a portion of which is taxed.
    • retube 11y ago
      Yeah but bonuses will be taxed at 50%. Corp tax is 22% so it's better they pay their staff more and report less profit.
      • DanBC 11y ago
        I need to apologise to Facebook then. Sorry, Facebook. EDIT: This looks like snark, but it's not. If I'm wrong I'm sorry.
• DanBC 11y ago
  No-one expects companies to pay the full whack of tax. But Facebook is taking the piss. They need to be a bit careful, because they risk causing much tighter tax regulation in EU. Citizens don't see this behaviour and think "well done, got one over on the government". Most citizens are infuriated by this scumbag behaviour. And before anyone says "they're just obeying the law" -- we don't know that. They're clearly not evading tax, just aggressively avoiding it, but some tax avoidance schemes haven't been tested in courts yet.
  • tragic 11y ago
    > They need to be a bit careful, because they risk causing much tighter tax regulation in EU. Don't think they've got much to worry about as long as Juncker's in charge of the commission at least. There will be huffing and puffing, but no blowing the house down.
    • exDM69 11y ago
      Some background: Jean-Claude Juncker, the current President of the European Commission has served as the prime minister and financial minister of Luxembourg. During his regime, they effectively turned Luxembourg into a tax haven for international corporations, allowing them to transfer "license fees" of trademarks, copyrights and other immaterial rights with effectively a flat fee (ie. no taxes paid, just a one time not-a-bribe fee paid to the tax authorities of Luxembourg). The primary export product of Luxembourg is banking and financial services. They also have some steel production and industry, but effectively without their shenanigans on tax evasion, the country would be bankrupt. A lot of this has recently come into daylight in the LuxLeaks [0] scandal. [0] https://en.wikipedia.org/wiki/Luxembourg_Leaks https://en.wikipedia.org/wiki/Luxembourg_Leaks
  • kauffj 11y ago
    I'm a citizen and I think that. Perhaps you describe most citizens, but certainly not all.
    • kybernetyk 11y ago
• radu_floricica 11y ago
  Tech companies don't show profits as long as there's place for development. They're still paying tax on everything else, including renting offices, paying salaries and bonuses etc.
  • DanBC 11y ago
    > paying salaries Isn't that a tax paid by the employee, not employer? Starbucks tried to say that they paid a lot in VAT, but that's a tax paid by the customer not the business.
    • Feoj 11y ago
      In the UK employers have to pay a "National Insurance" Contribution on top of the employee's contribution. https://en.wikipedia.org/wiki/National_Insurance https://en.wikipedia.org/wiki/National_Insurance
    • IanCal 11y ago
      Well, I don't think there's a huge difference, the money is taken before people ever see it although some people will claim a bit back. However, there is also employers NI which is definitely paid by the employer, at 13.8% over a low threshold.
    • garblegarble 11y ago
      >> paying salaries >Isn't that a tax paid by the employee, not employer? It's technically both - there's an element of National Insurance tax paid by the employer and an element payed by the employee (then the employee pays income tax on the remainder). The core of your point is correct, though, the bulk of the tax paid as a result of salaries is taken from the employee
    • radu_floricica 11y ago
      > Isn't that a tax paid by the employee, not employer I don't know why people still fall for this. The government may say whatever it wants, but the value of the paycheck is market determined which means taxes are taken from both sides. Unequally, of course, depending on how (in)elastic work supply and demand are.
• 3dfan 11y ago
  What is the news here? FB was making a loss last year, so why should they pay corporation tax?
  • IshKebab 11y ago
    They didn't make a loss. Read the whole article.
  • devit 11y ago
    The UK subsidiary was apparently making a loss, but the company as a whole wasn't. This might mean they shuffled money around to avoid paying UK taxes, i.e. they engaged in https://en.wikipedia.org/wiki/Transfer_mispricing https://en.wikipedia.org/wiki/Transfer_mispricing potentially breaking the law.
    • ptaipale 11y ago
      Then the taxman can get them. They just need proof. If the case is clear, why don't they go and get Facebook for breaking the law? Most likely because the case is not so clear: it is far from clear that they engaged in any transfer mispricing.
  • Marazan 11y ago
    The UK subsidiary made a "loss" whilst paying out millions of bounds of stock bonuses. Either Facebook UK is the most incompetently manged company in the world orrrrrrr...
    • fooster 11y ago
      The bonuses were taxed at personal tax rates, rather than coroporate. Furthermore, the personal tax rate is higher than the corporate, so why is this a bad thing again?
  • exDM69 11y ago
    > FB was making a loss last year They don't make actual losses - they pay all of their profits as "license fees" to some offshore entity to get their accounting show no profits. This probably means Luxemburg or Netherlands where they have a personalized deal with the tax authorities and the taxation of immaterial property is very low. In reality they made a shitload of money, and are using creative accounting to make it look like they made a loss. This is tax evasion, not making a loss.
• jkahn 11y ago
  Global companies offshoring profits and not paying enough tax (in the eyes of many countries) was a hot topic at the last G20 summit in Brisbane. This isn't limited to Facebook, as the article explains. The issue and background here is that when large companies operate globally, each country has its own local subsidiary, owned by the global entity. Money is made in each country by selling goods or services. How are the profits sent upstream to the parent company? By charging costs for goods; or license fees for services. As the company chooses their own costs and license fees, they can effectively control in which entity they make a profit and which they don't. This is also how companies shift profits to no- or low- tax jurisdictions. See: Apple and their large amounts of cash held outside of the USA. With increased globalisation, this is an issue for many countries. In Australia, for example (where I live), the roll out and success of Uber means that the taxi company tax base will erode. If Uber shifts profits overseas, the Australian Government gets less tax but still has to provide the same level (or greater) services. Uber's a better service, we want it to succeed, but tax is needed for necessary services. While companies continue to do this, the answer is information sharing between countries' tax offices and laws to ensure a certain amount of profits must stay on-shore, while not dis-incentivising multi-nationals from doing business in each country. As this already has political attention, I'd expect laws in most major countries to deal with this over the next 5 years. But Facebook are taking the piss here.
  • smt88 11y ago
    > provide the same level (or greater) services I don't agree with that in all cases, and I particularly don't agree related to Uber. When I lived in NYC, I often called "311" to complain about taxi-driver misconduct. This was the only outlet, and you really only did it because you wanted to feel better. There were never any direct consequences that you knew of. If you consider the decreased cost of operating the 311 service, as well as lower taxi-related crime, less drunk driving, etc., I'd guess that a government would spend less when Uber had replaced all traditional taxi services. (You can also think of Uber as redistribution of wealth from wealthier to less wealthy, since riders will usually be wealthier than drivers. In that case, Uber makes tax revenue go up, since poorer people usually pay more in taxes.) Edit: Clarified some language, since no one seemed to have understood anything I said the first time.
• TomGullen 11y ago
  TIL we pay 10-20x more corp tax than Facebook. Sometimes I feel like a fool, but we've always said from day 1 try to do things as honestly as possible which I'm quite proud of, but there really doesn't seem to be much practical upside apart from not being outed and shamed. First world problem I guess, at least we're turning a profit. It is starting to make me a bit bitter though. For example, we've spent a LOT of time making sure we file and pay the full VAT due on all our sales which is insanely complicated. Then we suffer further with the new VAT Moss rules which are aimed at targeting these big businesses who are avoiding it as best possible, but the end consequences being an even bigger burden for small businesses like us. Makes me wonder if we decided to exit if we could get a higher multiplier. Firstly we represent a reduced risk to the buyer, and secondly the buyer might see it as opportunity to absorb us into their accounting practises which would make us significantly more profitable overnight. I guess that is a potential benefit, but the idea of it ending like that doesn't sit comfortably with me.
  • jkahn 11y ago
    You're not a fool, you're just not a multi-national with the ability to legally avoid/minimize tax.
    • TomGullen 11y ago
      Along the way we've been offered ways to get around this and that which we've politely declined. Most obvious one being put your HQ in some country you've never been to in your life, we'd save buckets. Also, if you get down to the metal with VAT there's a lot of ambiguity (opportunity). My experience is that scale is not a prerequisite for it being economically beneficial.
      • arethuza 11y ago
        They didn't suggest "paying" yourself by loans from the offshore entity did they?
        • TomGullen 11y ago
• mrkmcknz 11y ago
  The UK press seems to have a field day when it comes to multi-national corporations not paying corporation tax. We will no doubt shortly have a number of MPs telling us how unacceptable this is and that Facebook need to start paying up. This all irks me a little. 362 Facebook staff on an average salary of say £65,000 will contribute at least £7,230,696.60 in taxes and NI to HMRC. Let's also not pretend that £65,000 is the average salary at Facebook UK, it's likely much higher. Then we can look at those 'stock' bonuses that much of the article seems to point towards. There will likely be capital gains tax paid by employees on the sales of those assets down the line. The UK has seen a strong economic recovery and remains a global financial centre and the business friendly tax policies of the UK likely contribute heavily towards this. If I had a choice between Facebook paying £4,327 in corporation tax but employing over 350 highly skilled individuals in the UK, or relocating to somewhere like Dublin due to aggressive taxation policies. I know what I would pick.
  • Marazan 11y ago
    If they hold them for 5 years there is no Cap Gains tax to be paid on the shares. Arguing that the tax employees pay should be taken into account when calculating a companies tax provision lacks merit. That's employees tax not the companies - this is especially true for companies such as Starbucks where if they were not monopolising high street space by abusing the tax system and small local coffee shop would happily take their space in a fungible manner meaning the employee tax payments would still take place and there would be no net loss for Starbucks not existing.
    • ropiku 11y ago
      The cap gain is only paid on the profit made when selling. RSUs are taxed as regular income when they are awarded. Most likely the employees are high rate tax payers so it comes out at 40-45% tax + National Insurance.
      • spacecowboy_lon 11y ago
        Sorry what is this RSU you speak of? tax on employee share options is quite different in the UK to the USA. With a HMRC approved scheme CGT effectively goes away and you only pay CGT after your yearly allowance and only on a real gain - no massive tax bill on underwater share options.
• kuyfiuyg 11y ago
  I'm asking someone who is more knowledgeable than me on this topic. What would happen if you replace all (most) tax with VAT? That would mean everywhere there is a real transaction, that generates greater value, that is where the tax is. It would also make it impossible for big companies to do tax evasion - since you limit the effects to the 'leaves' of the tree that is the economic system, you can catch the money before it escapes put the company 'tree' structure, out of the reach of the state.
  • dgoldstein0 11y ago
    Part of the problem though is that most businesses pass VAT tax on to consumers. Meaning that VAT tax essentially allows businesses to get their customers to foot the tax bill, and that everyone pays taxes corresponding to their consumption instead of their income. Usually you want the lowest earners not to have to pay much (if anything) in taxes, and VAT taxes don't allow for that.
  • vidarh 11y ago
    The issue with VAT is that as usually applied it is an extremely regressive tax. Poorer people spend a far higher proportion on their income on purchases that have VAT applied. If more categories of basic goods were zero-rated or exempt, or if other mechanisms were used to make the VAT burden less regressive, then it might be viable.
    • lagadu 11y ago
      That's how most of Europe does VAT: food, cultural and other essential products enjoy a very reduced VAT rate in many (but not all) countries here[1]. [1] https://en.wikipedia.org/wiki/Value-added_tax#Tax_rates https://en.wikipedia.org/wiki/Value-added_tax#Tax_rates
      • rmc 11y ago
        There can still be VAT for things poor people buy. Is there chocolate on your biscuit? Then it's "luxury" and you have to pay VAT.
• pja 11y ago
  So they paid next to no corporation tax. Meanwhile their employees will have paid a stack of income tax & the new rules on VAT should mean that all Facebook Ad sales to UK customers are subject to UK VAT. I don’t think the UK is being shortchanged all that much. When Google/FB et al were able to shift Ad sales to low-VAT regime holding companies, that was definitely taking the piss. This? Meh.
  • JupiterMoon 11y ago
    This argument is not valid. Yes they are paying VAT and income tax. So what? They should also be paying corporation tax. A start up competitor would have to pay VAT, income tax and corporation tax.
    • ghiculescu 11y ago
      Not if that competitor made a loss the way facebook has here.
      • JupiterMoon 11y ago
        These losses are paper losses. These type of paper losses are far easier for big multinationals to make than smaller domestic businesses.
      • tonyedgecombe 11y ago
        That wouldn't be an option in the way it is to Facebook if the competitor was based wholly in the UK.
      • throwaway2048 11y ago
        these 'loses' are entirely due to bogus licensing fees paid to the mothership, and the 'loses' are made up with very generous term 'loans' from the same.
    • yrro 11y ago
      But they are playing Corporation Tax. To put it another way... what additional tax do you want them to pay that they are currently not paying?
• gedrap 11y ago
  I don't have a hope that this tax issue will be solved any time soon. There are hundreds of billions dollars involved globally, and when you are talking about that much money... It's very hard to do much about it, let's be realistic. I quite agree about the attitude expressed here (Let's Just Give Up on Taxing Big Corporations, http://www.bloombergview.com/articles/2015-10-08/multinationals-don-t-pay-taxes-but-citizens-don-t-object http://www.bloombergview.com/articles/2015-10-08/multination... ). It's not fair but there's not that much that can be done.
  • bkor 11y ago
    That would give them a permanent unfair advantage over small and medium sized companies. In my country such companies employs loads of people.
    • gedrap 11y ago
      But they have that advantage already, they can afford to do things as described in the original link. They employ a bunch of accountants, offshore experts, etc. I am not exactly sure if similar means as described in the article I've linked would change much.
• ksec 11y ago
  Slightly Off Topic - I would presume this is the same everywhere else. Tax only on Accounting Profit? If so did Amazon ever pay any tax? ( Apart from Sales Tax where it is required) Since they haven't really been making any accounting profits at all.
• 3dfan 11y ago
  The article is ultra thin on informations. What is the news? That FB UK transfered profits out of the UK to avoid corporation tax? Is that a problem? I honestly don't know. What is the intention of corporation tax? I would think that the "who uses our streets and is protected by our police has to pay for it" tax is VAT. How is FB doing in terms of VAT?
• stegosaurus 11y ago
  Re-posting my comment from the Guardian thread that came up earlier ( https://news.ycombinator.com/item?id=10371728 https://news.ycombinator.com/item?id=10371728 ) Corporation tax in the UK is payable on 'profits subject to corporation tax'. In laymen's terms this is roughly equivalent to to accounting profit. Employee salaries, bonuses, etc are generally deductible; if you pay me 50K, that's 50K out of your bottom line. The employees in question likely pay a variety of taxes including but not limited to the standard income tax. In an extreme scenario (recent graduate + highest tax band) that could be 61% rate. (For comparison, the 2015 rate for Corporation Tax is 20%; so as far as the Exchequer is concerned, a salary payment is preferable, at least in immediate terms). In summary, I think there's a discussion to be had here about abuse of taxation frameworks but the headline here is bait; the bonuses are irrelevant, any oddities regarding transfer payments etc. are what should be focused on. edit: My position on taxation in general is that we should be focusing on Capital Gains Tax (taxes the gain on appreciation of assets such as shares) and Income Tax (taxes income from sources such as employment, share dividends). Taxing corporations seems like it can only ever be arbitrary at some level, because they don't.... 'exist', for lack of a better term. They can be ephemeral, relocate, etc.
  • arethuza 11y ago
    Shareholders are generally pretty keen on the "existence" of a corporation when it comes to limited liability.
    • RealGeek 11y ago
      and when it comes to lobbying, politics and religious rights... Corporations suddenly become people.
  • TomGullen 11y ago
    What about scrapping corp tax, and replacing with a higher VAT rate?
    • petercooper 11y ago
      The public would go mental. VAT is seen as being most onerous on low earners. Something like a very low "turnover tax" for businesses could potentially work though. We take about £40bn in corporation tax each year. Total business revenue in the UK is around £3.2tn, so a 1.25% turnover tax would cover it.
• snorrah 11y ago
  Shameful. Just shameful. I don't care how it gets sugar coated, if you claim to be working for the good of humanity (in facebooks case by connecting people together) and then you loophole yourself out of paying taxes, you are morally bankrupt.
  • ams6110 11y ago
    If the tax law allows it, they have no reason to pay more than they do. To do so would be not in the interests of their owners/shareholders. If you have a problem with tax "loopholes" then fix the tax law. Don't blame a business for paying only the tax it is legally obligated to pay. Would YOU pay more taxes than you have to?
    • DanBC 11y ago
      >Would YOU pay more taxes than you have to? Most people pay more tax than they need to because they don't have access to devious accountants who create excessive tax-avoidance schemes. Most of these schemes are neither normal tax planning nor a bit of tax avoidance. They are aggressive tax avoidance that exploit the regulations in weird ways. They're legal, but only because the regulations were malformed (and will get re-made) or because the schemes haven't been tested in courts. And the way UK tax authorities work is rightly to use courts as a measure of last resort, preferring negotiation instead.
    • throwaway2048 11y ago
      guess who lobbies the government for these type of loopholes to begin with?
  • Cakez0r 11y ago
    I wouldn't be so quick to condemn them. If you were running a business that had earned millions in profit for the financial year and were faced with the option of A) distributing it all out to your employees in the form of bonuses (which, of course, would be taxed) or putting all the profit in the bank and paying a huge tax bill, which would you pick? This seems like a good example of wealth trickling down to me, but it's painted as tax evasion.
• rmc 11y ago
  > "We have to ensure our taxes are simple to eliminate loopholes, and that taxes are low to increase our competitiveness, so that companies choose to base themselves here." Pick one. You can't have both.
• nr152522 11y ago
  "It means Facebook's UK corporation tax bill was less than the tax the average UK employee paid on their salary." "The average UK salary is £26,500 on which employees pay a total of £5,392.80 in income tax and national insurance contributions." Corporation tax and personal tax are not the same thing so I don't see how they can be compared. In fact, in terms of taxes paid to HMRC, they would have been paid more tax overall. However, considering they made a pre-tax loss, they should have probably reviewed those payouts of which I assume was shared amongst those on top.
  • fooster 11y ago
    If they reduce their profit to zero by paying out to the employees this means they don't have to pay any corporate tax, and the employee has to pay income tax. The personal income tax rate is generally higher than corporate, so why is this a bad thing?
    • deleted 11y ago
      [deleted]
• JupiterMoon 11y ago
  The thing that large corporations should remember is the the UK is one of the few countries in the world that can pass retrospective legislation and then enforce it (this has happened on tax issues as recently as the 2000s). At some stage a UK government is going to claw back this money and I think it won't be pretty for anyone. (NB I fundamentally don't agree with the concept of retrospective legislation I'm merely saying the UK can do it.)
  • shrikant 11y ago
    I found this ex post facto-ing, so I dug up a relevant link: http://news.bbc.co.uk/2/hi/business/8496921.stm http://news.bbc.co.uk/2/hi/business/8496921.stm The law in question is the Finance Act of 2008.
• dpatru 11y ago
  In terms of providing social value, Facebook employees far surpass any government's employees. In just a few years Facebook has revolutionized how people connect with each other, whereas governments have, in general, barely been able to maintain the accomplishments of previous generations. This despite the fact that government generally force people to pay about one fifth of their labor, whereas Facebook offers its services for free. Governments should wither and die in favor of more socially beneficial organizations like Facebook.
  • SuddsMcDuff 11y ago
    You're taking a highly subjective view and presenting it as fact. That Facebook is a "socially beneficial organization" is extremely debatable. I would argue that Facebook has actually had a detrimental effect on social cohesion.
    • dpatru 11y ago
      Facebook offers free services to ordinary people to help them stay in touch with their friends. It also offers a paid services to businesses to help them communicate to actual and potential customers. Anyone who uses Facebook can stop at any time. People use Facebook by choice. In contrast, governments are violent organizations specialize in coercion. Governments extract their revenue by force or threat of force and use their revenue to fund institutions and projects that people would not pay for voluntarily. Governments maintain power by direct force (police and military), by deceit and misinformation (control of the money supply, compulsory education), by monopolizing necessary institutions and services (dispute resolution, security), and by appealing to people's greed and envy. It is nearly impossible to opt out of government services, especially in the sense of not paying for them (taxes).
• inthewoods 11y ago
  FB is playing the game that corporations play all over the world - global tax arbitrage. They shift operations, losses and profits to different countries based on tax policy. The similar thing happens here in the US at the State level. It isn't uncommon for large companies to pack up and move their operations to lower tax States, or to actually bargain with individual States over who will give them the best deal. Here in Massachusetts, Fidelity packed up and left for North Carolina and Texas - they found it was cheaper to move employees than pay the taxes. This will likely continue as long as different countries (and States) have different tax schemes - and that isn't going away anytime soon. Soon we'll probably have a renewed call for a lower tax rate here in the US for companies to repatriate those revenues.
  • ptaipale 11y ago
    Tax policy, but not just tax policy. Companies also place their operations based on cost (total operating cost, including logistics costs and whatever). For instance, it is not a surprise that so many computers and smartphones are made in China.
    • inthewoods 11y ago
      Completely agree - but if you look at these global companies, many just locate their headquarters in tax-free zones while not having a substantial amount of employees, or engage in tax avoidance strategies like the Double Irish. But you're right - it's not typically only for tax reasons.
      • ptaipale 11y ago
        Another reason is that tax havens (such as Cayman Islands, or within EU also Luxembourg or London) often have substantial amounts of financial services - lawyers and other experts are available. So, for the logistics of running headquarter functions, it's not necessarily that taxes are low, it's also that there's available expertise for operation.
• samfisher83 11y ago
  Instead of corporate tax the employees are being charged individual tax. I think eventually the government gets the money.
• deleted 11y ago
  [deleted]
• ryanmac 11y ago
  "It's about the spirit of the law versus the letter of the law. At the end of the day tax evasion is illegal, when you're deliberately setting out to not pay your tax by hiding your money," This is so wrong. Close these loopholes so a million dollar accountant and a regular accountant play by the same rules. It's as if a soccer didn't have an offsides rule and then some complained about teams taking advantage of offsides. Change the law and move on. Don't complain about companies exploiting a huge hole you created.
• DrNuke 11y ago
  The political point here is that big corps are unfairly draining a lot of money out of the local systems they operate in. This leads to reducing services locally, starving the unemployed and the poor and straining middle classes big time. Exhilarating amounts of money are funnelled and stockpiled under the name of unaccountable entities named Apples, Googles etc. against many millions poor that wil need basic income to survive sooner than later. Is this the world we need, really? The principle is simple: local branch entities pay taxes locally just as any local small business.
• buro9 11y ago
  I worry about the drip-drip-drip of information that the British public can (and probably will) use to end up at the conclusion that leaving Europe in the future will be the silver bullet to all of the issues. Immigration from Europe > Leave Europe (we're an island!) Can't deport or be cruel to alleged terrorists > Leave Europe (we don't need the European Convention on Human Rights) Can't stop corporations playing the tax system > Leave Europe (the borders become hard, the taxes unavoidable) Our press don't really need more reasons to whip up the anti-EU mob, corps shouldn't help them do so.
• something123 11y ago
  Am I alone in thinking corporation tax is idiotic? I think corporations are incredibly immoral institutions (due to skewed incentive structures), however - ultimately it's a collection of investors, owners and employees. Why not be honest and tax the corporations on the outflow of capital? ie. dividens, wages and sales tax Corporate tax is ultimately a populist hidden tax on the whole economy b/c no one "feels" it. If you raise it everyone will whoop and cheer (b/c fuck big co!) and not appreciate it's impact on salaries or retirement funds. Maybe I'm missing something?
• nevi-me 11y ago
  From my tax knowledge, in South Africa it's difficult to get away with paying ridiculously low amounts of tax consistently. The corporate tax rate is 28% taxed on worldwide earnings. Though you prepare returns as a single entity (i.e. each subsidiary files its returns and the holding company would also file its own return), there are transfer pricing provisions, as well as provisions for connected persons (related parties/companies) that make it difficult to just keep 'profits' in Ireland without paying taxes on them. If I could argue that if FB was headquartered in SA it would be paying at least 20% effective taxes, then surely the issue would be that the specific countries (US and EU) have lenient tax laws. Companies will keep gaming the system if lawmakers don't have the appetite to ignore company lobbying and do what's best for the income of their countries. Whether the issue is that they don't want to lose the business of these tech companies is something else. South Africa started imposing VAT on digital services sold by foreign companies last year. As a result my Google Play Music subs started costing me 14% more, funny enough as I technically shouldn't even be having All Access as I'm in an 'unsupported country'. Apple still charges me the same for music, which means someone had to take the loss to keep the value the same. Nonetheless, some people are unhappy, but our country gets to benefit with the extra 14% collected.
• tim333 11y ago
  They should have a new tax where a companies profits are estimated globally and then a percentage of that is allocated to the countries where it trades based on the amount of trade done there. So if facebook's global profits are $2.9bn and it does 50% of trade in the US then it should be taxed as having made 1.45bn there and then pay US tax (35%) there so $507m there, even if they claim all the profits were made in some tax haven. It seems a simple solution but there is probably not much lobbying money in the politicians bringing it about.
• david_mitchell 11y ago
  The basic problem here is that business is now global whereas taxation is still at the nation state level. Countries have to compete for business and smaller states with limited resources can bring in money by becomming tax havens. I don't really know of any solution to this. I think it's worth pointing out that even from the perspective of most businesses this situation sucks. Smaller companies or startups lack the resources to benefit from tax avoidance schemes so are at a disadvantage to their larger competitors. And if you do start a company that is growing large you don't really have much choice but to start doing it too. You won't be able to compete if you are paying 20% and the competition is paying 2%. You have to do it because everyone else is doing it.
• cpursley 11y ago
  Corporations don't pay tax even when they do. The tax is a cost passed on to the end consumer. I'd rather see a combination of a progressive consumption tax (necessities < luxuries) combined with trade tariffs that's appropriate for the country being traded with. This would circumvent the shell company trick.
  • dragonwriter 11y ago
    Yes, corporations pay tax, even when it looks like they just pass it on in prices, since they lose after tax income (except in the unusual case where price does not affect volume sold so long as competitors face the same price increase.)
  • throwaway2048 11y ago
    The idea that all taxes are just costs passed onto the consumer is patently abusrd, if they could easily raise prices to that level and have people pay, they already would have. It effects profit margins much more than it does the prices they set.
• tcfunk 11y ago
  > The average UK salary is £26,500 on which employees pay a total of £5,392.80 in income tax and national insurance contributions. Whoa, what? That's some hefty tax for the 26k bracket!
  • cardinalfang 11y ago
    Half of that is national insurance which is concentrated on £8k - £35k band, counteracting the progressive income tax bands.
  • kuschku 11y ago
    Nah, that’s not much. Germany is closer to 40% tax in that bracket. Denmark and co, too.
• lukasm 11y ago
  Why not reduce corporate income tax and add 1% revenue tax? If you can't afford 1% you are gonna go bust anyway.
  • hawkice 11y ago
    So, the generic answer for why we favor income or value-added taxes over revenue taxes is that (1) we want to encourage investment, so marginal business expenses are essentially tax-free, and (2) revenue taxes limit the ability for competitive middlemen (who can lower transaction costs) and give massive advantage to vertically integrated semi-monopolies.
    • lukasm 11y ago
      Sure, but maybe the benefits outweigh costs. Revenue tax reduces accounting costs, simplifies models, it's better for small startups etc.
• ac1294 11y ago
  The £4,327 tax is only talking about the UK subsidiary, right? Because from their income statement [1], they paid $1.97B in income tax on $4.91B income before tax for a rate of 40.12%. I might be misinterpreting something, but I think we should be careful to accuse them of abusing loopholes if they're still paying such a high rate overall. [1] http://finance.yahoo.com/q/is?s=FB&annual http://finance.yahoo.com/q/is?s=FB&annual
• joesmo 11y ago
  What's the point of having a company like FB or Starbucks in your country if they're an incredible net loss to the economy? Why not stop attracting these kinds of businesses or even actively seek to kick them out? I mean, assuming that fixing the tax laws for corporations is impossible, which I think at this point is a fair assumption. With numbers like this, it'd be easy to morally justify looting, and other otherwise criminal activities against both these types of corporations and the government that allows them existence. It'd seem to start tearing down at the social fabric in many countries, not just the UK, where the poor are actually taxed more than these corporations. With just a little more poverty and misery, I wouldn't be surprised if at some point we started seeing violence and social upheaval as people realize they have no other recourse. And who could blame people if they reacted this way?
• kriro 11y ago
  I'd kind of like to spend a day with the people who think up these schemes and pick their brains (lawyers, accountants, CFOs, whoever works on this). Not because I want to "optimize taxes" but because I'm genuinely curious about how they tick, if they see it as a game of sorts etc. You have a complicated legal framework and try to optimize in it. At the end of the day I'd still wonder...gee is it "ok" that we pay only that much but like I said I'd like to see how this general problem is approached.
• laichzeit0 11y ago
  Trump's solution? Cut the U.S. corporate tax rate to 15% from the current top rate of 35%. This would make corporate inversion unnecessary. I think he also had the idea of capping tax at 10% for companies wanting to bring their money back. At some point you have to ask yourself "why are companies doing this?" and fix the root cause.
  • te_chris 11y ago
    Creating a race to the bottom is the opposite of fixing the root cause. The US already has a way to deal with this as it's the system used internally between states: levy taxes where sales happen.
    • laichzeit0 11y ago
      So the idea is to punish corporates into submission instead of making it so cheap to do business in the USA they don't wanna go elsewhere?
  • toephu2 11y ago
    Do any presidents actually follow through with what they say during pre-election? Plus a president doesn't even have the power to lower corporate tax by himself anyway.
• WeAllDieByBan 11y ago
  Why do people think that taxation follows a simple accounting mechanism of collect-and-spend? Taxation is collateral for a soverign to get loans and bonds. Taxes do not pay for anything.
• forrestthewoods 11y ago
  Excellent. Paying the smallest amount of taxes one is legally obligated to pay is one of the most noble of endeavors. If every country got their "fair share" of revenue the total taxes on $1.00 would be approximately $1.50.
• evanpw 11y ago
  So...the employees likely pay a larger amount in income taxes than Facebook would have paid in corporate taxes, and the remainder goes to the actual UK employees rather than shareholders in the US. Isn't this the best possible outcome for the UK? Is this article just pure mood affiliation (greedy corporations!), or is there something I'm missing?
• oliwarner 11y ago
  It's a good headline but in this case, HMRC made somewhere between two and five times as much money through Facebook's accounting choice here than had they kept the money as corporate profit. That's because the Facebook paid out those profits to employees as bonuses. That wiped out the corporate profit but the employees have paid income taxes which are much, much higher than corporation tax. This is significantly different from the corporate tax dodging companies like Amazon EU do by bribing EU states into letting them have a super-low corporate rate if they put all the EU books through that country. Not saying that Facebook aren't also doing that, that's just not what this is about.
  • to3m 11y ago
    I wonder what the response would have been had it turned out Facebook were going to pay their employees less, because they'd be making more profit that way ;)
• denysonique 11y ago
  Less taxes == more money in our pockets. Facebook higher taxed == FB Ads more expensive == Higher product prices for the consumers Taxes are always as result paid by the consumers/employees, never by "businesses". Money saved by Facebook corresponds to money saved in our pockets.
• Nelkins 11y ago
  Does anybody have any recommendations for decent books or articles on corporate tax evasion?
• jayess 11y ago
  Outstanding. Tax competition is a good thing.
• callesgg 11y ago
  Thats why you get some good finance people, to use the system against itself. Aslong as it is legal great, mabye the UK should fix some tax laws if that is the case, if it is not legal fine them..
• lifeisstillgood 11y ago
  There are several main pain points : - companies need to be treated as "unitary" - that is passing profits around internally should not affect the tax paid - profit is the least definable of all measures. Revenue is something companies don't like to lie about. - this change will have to come to small and even consumers to be fair (my wife and I are a unitary item ? Can we share tax allowances?) - even if we decide on treating companies as one black box, choose a better metric to tax on (revenue, dividends) we still do not have a formula for distributing across national borders. Should the US get all Facebooks profits? No. Should Facebook pay UK based on number of UK users it has? Doubtful. So .... We are not going to see this end well - unitary treatment seems obvious but a international agreement on how to divide tax will need another two world wars to sort out.
• United857 11y ago
  As others have pointed out, this is far from unique to FB. I'd be surprised if any large multinational corporation didn't do such creative "optimizations" globally. E.g. British companies doing the same thing in the US: http://www.washingtonpost.com/wp-dyn/content/article/2006/09/11/AR2006091100429.html http://www.washingtonpost.com/wp-dyn/content/article/2006/09... Don't hate the player, hate the game.
• baxterross 11y ago
  So, Facebook provides a free service to millions of people in the UK, and people are pissed that Facebook isn't PAYING more for the privilege of giving them free stuff? Sounds like a bunch of ungrateful children to me.
• kevindeasis 11y ago
  Not from me: As an accountant, most people are not going to be happy with my comment, as it goes against the Group Think here, but this number likely makes sense for the following reasons: 1) Facebook is an American company so discussing up its U.K. Income tax is click bate, pure and simple. American companies pay the majority of income taxes to the US, of which Facebook had at $1.9B tax bill in 2014. 2) there are very complex cross-border income tax rules, where at a high level, other countries will make a corporation pay income tax on business income earned in its country. However, it says right in the article, Facebook UK had a taxable loss last year, and in most jurisdictions you can use prior year losses to reduce current year taxes payable, which is likely what is happening here. 3) they would be paying a lot of other taxes to the UK government. The article mentions employees meaning there will be a host of payroll taxes. There would also be sale tax. The article implies shirking the system, but believe me, governments want and get their money. In summary, this article is click bait trying to get people angry at things they do not understand unless you work as an accountant or tax lawyer.. Source: https://www.reddit.com/r/worldnews/comments/3ofo13/facebook_paid_4327_of_uk_corporation_tax_in_2014/cvwz9ft https://www.reddit.com/r/worldnews/comments/3ofo13/facebook_...