6 ms·

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'

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
      I don't believe so.
- bduerst 11y ago
  Pretty much. Only once a companies' net income reaches a certain level does it start to become beneficial to play the international tax game.
SmellyGeekBoy 11y ago
I'm a one-man-band and I paid about double the corporation tax Facebook did in 2014. My turnover isn't even high enough to register for VAT. Really makes you think!
- TomGullen 11y ago
  Just FYI, when you do need to register for VAT make sure you check out the benefits of Flat VAT, for us it was significantly more economical then regular VAT registration. I'm constantly surprised how many accountants don't seem to even make their clients aware of this option.
  - SmellyGeekBoy 11y ago
    Thanks for the advice. I was pretty close to the threshold last year and it's looking likely I'll have to register this year so I'll certainly look into it. I'm actually between accountants at the moment, although HMRC's own PAYE RTI app at least makes that side of things ridiculously easy for me. I certainly wasn't looking forward to dealing with VAT on my own.
    - phillc73 11y ago
      When I started my UK Limited company I immediately registered for VAT, so I could claim VAT paid on purchased startup equipment, which was mostly computing goods. I could then obviously offset that against VAT collected in the first months of business. I quickly discovered that quarterly VAT returns were a pain, and accountants aren't cheap (for some definition of cheap). I am also just a one man band at the moment, and de-registered for VAT about a year ago. Unless there are significant savings to be made, or you're over the £82k per annum revenue threshold, factor in the cost of the effort to submit these returns. They really are just a distraction from the main focus of your startup business.
      - surreal 11y ago
        Have you looked into accounting software? Like you, I de-registered for VAT for a while, but since using FreeAgent I've re-registered and haven't looked back. VAT returns are now just a click each quarter (plus the minimal clicks to upload and explain my bank transactions periodically). VAT nuances (VAT on reclaimed mileage, reverse charges, etc) are taken care of automatically too. Not to mention all the other time savings (expense receipts uploaded straight from smartphone, tax return & accounts now only take 5-10 mins at end of year using the reports FreeAgent generates, etc etc etc). I'm not affiliated with FreeAgent (other than my referral code 44gf6bbt, which would give both parties 10% off for life). Just an incredibly satisfied customer; it was by far the best of the 3 or 4 tools I trialled.
linkydinkandyou 11y ago
> as honestly as possible Nobody has suggested that Facebook is violating tax law are they?
catshirt 11y ago
it's misguided to call tax practices like these dishonest because it puts the blame on Facebook, who is operating legally in the system they are provided. the alternative is that they knowingly pay more tax than the law requires of them. which is ridiculous. don't hate the player, as they say...
- saiya-jin 11y ago
  this is true in scenario where these massive corporations are just passive bystanders, obediently following all new tax laws that come up daily. the reality is, through networks of lobbyists, they put forth laws with loopholes that allow these practices. i am not accusing facebook specifically, any and all multinationals are guilty in a similar way, be it banks, procter&gamble or newest computer fad beyond-startup company. and of course there is the moral aspect - everybody can see from raw numbers how utterly immoral behavior this is. in a world where financial crisis didn't end as much as it became new norm.
  - deleted 11y ago
    [deleted]
vijayr 11y ago
It is not just the tax code - one can be honest in everything, but the most likely result would be the person is left behind and becomes bitter and unhappy. Because others will break, it at least bend the rules if they can get away with it. In this case it kinda becomes a competitive advantage - all things being the same, if one company does "creative" accounting and the other doesn't, chances are the latter can't compete effectively. Th worst in all of this is that the general public views these companies as smart for exploring loopholes rather than getting annoyed with them. None of this is to say that one shouldn't be honest. Just be aware of what it costs to be honest, in a system full of loopholes
pdabbadabba 11y ago
Note that the article, as I read it, only refers to UK taxes. Presumably Facebook also pays taxes in other jurisdictions. (Also note that the headline refers only to corporation taxes. Facebook will also be subject to many other sorts of taxes in the U.K. and a multitude of jurisdictions. This is not to say, though, that Facebook on the whole pays its fair share of taxes. It probably doesn't, but a person can't draw many reliable conclusions about this on the basis of this article alone.

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
    I don't believe so.
bduerst 11y ago
Pretty much. Only once a companies' net income reaches a certain level does it start to become beneficial to play the international tax game.

SmellyGeekBoy 11y ago

I'm a one-man-band and I paid about double the corporation tax Facebook did in 2014. My turnover isn't even high enough to register for VAT. Really makes you think!

TomGullen 11y ago
Just FYI, when you do need to register for VAT make sure you check out the benefits of Flat VAT, for us it was significantly more economical then regular VAT registration. I'm constantly surprised how many accountants don't seem to even make their clients aware of this option.
- SmellyGeekBoy 11y ago
  Thanks for the advice. I was pretty close to the threshold last year and it's looking likely I'll have to register this year so I'll certainly look into it. I'm actually between accountants at the moment, although HMRC's own PAYE RTI app at least makes that side of things ridiculously easy for me. I certainly wasn't looking forward to dealing with VAT on my own.
  - phillc73 11y ago
    When I started my UK Limited company I immediately registered for VAT, so I could claim VAT paid on purchased startup equipment, which was mostly computing goods. I could then obviously offset that against VAT collected in the first months of business. I quickly discovered that quarterly VAT returns were a pain, and accountants aren't cheap (for some definition of cheap). I am also just a one man band at the moment, and de-registered for VAT about a year ago. Unless there are significant savings to be made, or you're over the £82k per annum revenue threshold, factor in the cost of the effort to submit these returns. They really are just a distraction from the main focus of your startup business.
    - surreal 11y ago
      Have you looked into accounting software? Like you, I de-registered for VAT for a while, but since using FreeAgent I've re-registered and haven't looked back. VAT returns are now just a click each quarter (plus the minimal clicks to upload and explain my bank transactions periodically). VAT nuances (VAT on reclaimed mileage, reverse charges, etc) are taken care of automatically too. Not to mention all the other time savings (expense receipts uploaded straight from smartphone, tax return & accounts now only take 5-10 mins at end of year using the reports FreeAgent generates, etc etc etc). I'm not affiliated with FreeAgent (other than my referral code 44gf6bbt, which would give both parties 10% off for life). Just an incredibly satisfied customer; it was by far the best of the 3 or 4 tools I trialled.

linkydinkandyou 11y ago

> as honestly as possible Nobody has suggested that Facebook is violating tax law are they?

catshirt 11y ago

it's misguided to call tax practices like these dishonest because it puts the blame on Facebook, who is operating legally in the system they are provided. the alternative is that they knowingly pay more tax than the law requires of them. which is ridiculous. don't hate the player, as they say...

saiya-jin 11y ago
this is true in scenario where these massive corporations are just passive bystanders, obediently following all new tax laws that come up daily. the reality is, through networks of lobbyists, they put forth laws with loopholes that allow these practices. i am not accusing facebook specifically, any and all multinationals are guilty in a similar way, be it banks, procter&gamble or newest computer fad beyond-startup company. and of course there is the moral aspect - everybody can see from raw numbers how utterly immoral behavior this is. in a world where financial crisis didn't end as much as it became new norm.
- deleted 11y ago
  [deleted]

vijayr 11y ago

It is not just the tax code - one can be honest in everything, but the most likely result would be the person is left behind and becomes bitter and unhappy. Because others will break, it at least bend the rules if they can get away with it. In this case it kinda becomes a competitive advantage - all things being the same, if one company does "creative" accounting and the other doesn't, chances are the latter can't compete effectively. Th worst in all of this is that the general public views these companies as smart for exploring loopholes rather than getting annoyed with them. None of this is to say that one shouldn't be honest. Just be aware of what it costs to be honest, in a system full of loopholes

pdabbadabba 11y ago

Note that the article, as I read it, only refers to UK taxes. Presumably Facebook also pays taxes in other jurisdictions. (Also note that the headline refers only to corporation taxes. Facebook will also be subject to many other sorts of taxes in the U.K. and a multitude of jurisdictions. This is not to say, though, that Facebook on the whole pays its fair share of taxes. It probably doesn't, but a person can't draw many reliable conclusions about this on the basis of this article alone.