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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 t

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.
    - drited 11y ago
      RSU = restricted stock unit whether you're in the UK or the USA.
      - spacecowboy_lon 11y ago
        Never heard of RSU's in the UK context - UK taxation depends on if its an approved scheme or not.
    - kd5bjo 11y ago
      An RSU is more like a stock grant than a purchase option -- the company provides shares of stock to its employees according to a vesting schedule. The fair market value of the shares at the time of vesting is considered income, and there is no cost to the employee (other than income taxes). I don't know if this is a US-only arrangement, or if it's used in other countries as well.
    - ropiku 11y ago
      The other repliers added more info, sorry. You are correct about share options, on which your gain is only the price difference for which you pay CGT (or not). But the liquid tech companies (Google, FB, Twitter) give out direct stock which is taxed on their Fair Market Value at the time of vesting. RSUs are taxed the same way both in UK and US.
- drited 11y ago
  'If they hold them for 5 years there is no Cap Gains tax to be paid on the shares' Why not?
bkor 11y ago
That's why it has to be done across many countries so global companies cannot play one country against another. Your assumption that there are only two options doesn't apply.
switch007 11y ago
> 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 not pretend all 362 Facebook staff are paying tax via PAYE.
- 100timesthis 11y ago
  maybe stupid question: do you expect a lot of fake contractors or there is another way? Because if they are contractors they wouldn't be part of those 362 in staff right?
  - marrs 11y ago
    I think the parent is referring to contractors, who avoid PAYE but still have to pay dividend and corporation tax. The dividend tax rate is about to go up so the PAYE issue is about to become void.
    - switch007 11y ago
      Sorry, I was more thinking of the executives, whose large salaries would skew the average, and would have a complicated compensation package, and can afford accountants to do creative accounting. I do not know if there are executives included in that 362 employee figure.
      - marrs 11y ago
        oh right, good point. If only journalism wasn't in such a sorry state, we might know the answer to that question. They might be drawing a high salary, equally they might be drawing no salary at all and living as non doms.
- robk 11y ago
  I'd be happy to pretend that. Most of Facebook UK staff are actually employed here as high value employees (engineers, sales). I'd be very surprised if there were many contractors here in the UK.
crdoconnor 11y ago
More trickle down economics! Is it 1992 again?
domfletcher 11y ago
The thing is that is the employees that pay the the income tax _not_ Facebook. Facebook (and others) are still not paying the taxes on the the income they earn from operating in the UK no matter how many people they employ at high salaries. The choice you present is a false one, the multiplier productivity effect that Facebook employees gain from operating in London as opposed to Dublin far outweighs what Facebook would end up paying in corporation tax under a more reasonable system.
- marrs 11y ago
  You forgot the VAT that Facebook's UK clients have to pay, the VAT Facebook have to pay on their expenses in the UK, the council tax that they have to pay on their offices, the pension and NI contributions they have to make, etc, etc. At the end of the day, they aren't a UK corporation, so why should their corporation tax by high? To be honest, it's hard for me to really form an opinion on this when the information provided by the media is so superficial. For that reason I tend to share mrkmcknz's sentiment. It all smells too much of the kind of trolling that's institutionalised in the media now.
s_dev 11y ago
Do you think they'd pay more or less tax in Dublin compared to £5k? Irelands 12.5% seems very reasonable considering its so close to its effective rate. France, Britain and Germany all allow massive write offs and loop holes that mean their effective rate is multiples lower than their stated corporate tax rate and this story will be forgotten by the Brits, Germans and French who'll turn around and repeat their condemnation of Ireland as a cheap tax haven when negotiating EU funding. Starbucks get away with the same thing. Amazon intentionally doesn't turn a profit and so evades this whole situation altogether. Anyway Facebooks EMEA is already in Dublin.
- rmc 11y ago
  It's always funny when Brits complain about foreign tax havens. The UK is a massive tax haven, with oodles of little overseas territories, or Isle of Man, or the Channel Islands.
  - JupiterMoon 11y ago
    In general if we know about them (most people don't) we object to this just as much. NB the channel islands aren't strictly speaking a part of the UK.
  - marrs 11y ago
    Neither the Isle of Man nor the Channel Islands are a part of the UK.
    - pjc50 11y ago
      Urgh. This is part of the problem. They're Crown Dependencies. They're neither fully independent countries nor part of the UK. They're accountable to their own local electorates but host a lot of firms doing business that's really in other countries. They're ideal tax havens. I am fond of the constitutional tweeness of Man, Sark, etc, but their situation really does need to be regularised.
      - spacecowboy_lon 11y ago
CraigJPerry 11y ago
It is right of the press to point out egregious transgressions. EDIT for brevity.
toyg 11y ago
> relocating to somewhere like Dublin Afaik Facebook is still overwhelmingly based in Dublin, employing three times as many as in the UK. They likely hire in the UK the bare minimum they really need. So yeah, they've already "relocated" really. This is the same for pretty much any European corporation, btw. Anyone who could leave for cheaper shores, did so in the '00s. What is left are the essential crews strictly necessary to the job of tapping one of the richest consumer markets on the planet. The "employment threat" is basically toothless nowadays anyway, because "new economy" numbers are ridiculous in the great scheme of things -- 350 jobs won't change much of anything.
notahacker 11y ago
I don't think it's advocacy of "aggressive taxation policies" to argue that the corporation tax bill for a profitable multinational earning millions in UK revenue ought to be higher than the income tax bill for an individual person on the UK average wage. YMMV. How many of Facebook's 362 UK staff would be unemployed for any significant period if they relocated to Dublin? How many would instead be adding value to a company that paid 20% corporation tax, whilst paying similarly high taxes on a similarly high salary?
- marrs 11y ago
  I don't understand what you're arguing for. If Facebook shut down UK operations then, for starters, Facebook would be paying no tax at all in the UK and Ireland would gain the difference. If the Facebook UK staff relocated to Dublin then the loss to the UK economy would be exponentially worse.
  - mootothemax 11y ago
    >If the Facebook UK staff relocated to Dublin then the loss to the UK economy would be exponentially worse. Can anyone say that for certain? How do you know, for example, that the same staff they'd employ wouldn't end up working for a company that does pay a large amount of corporation tax, leaving the UK's tax coffers substantially better off than they'd be otherwise?
    - marrs 11y ago
      I'm not saying they wouldn't - I'm sure they probably would - but that wouldn't stop there being 362 fewer roles in the UK. If the industry in the UK continues to grow then yes we would be better off, but the fear is that more companies would learn from Facebook's example and relocate, taking the growth with them.
mootothemax 11y ago
>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. Why should Facebook get to enjoy an advantage over 36 companies employing 10 people each at a similar average salary? >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. You'd prefer every large company to be based in the UK and not pay corporation tax? Of course not. Personally, I think we're long overdue another huge waste like DeLorean coming along.
- marrs 11y ago
  Why should Facebook get to enjoy an advantage over 36 companies employing 10 people each at a similar average salary? Let's turn it around. How would you go about taxing a corporation that didn't make much profit last year
  - mootothemax 11y ago
    >Let's turn it around. How would you go about taxing a corporation that didn't make much profit last year From the article: "[T]he firm also paid its 362 UK staff a total of £35.4m in share bonuses." That says to me that it'd be worth trying to figure out how to reconcile that against "a pre-tax loss of £28.5m."
    - the_mitsuhiko 11y ago
      So you should not be entitled to bonuses when you work in the UK office because the UK office does not have enough revenue to make up for the cost of the workforce, but the same people in the SFO office should?
      - mootothemax 11y ago
        >So you should not be entitled to bonuses when you work in the UK office because the UK office does not have enough revenue to make up for the cost of the workforce, but the same people in the SFO office should? 1. I didn't say that. 2. What's to stop the SFO office issuing the bonuses?
tomelders 11y ago
I utterly reject this argument > 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. First of all, that's Facebook employees paying tax. Not Facebook. That's their money that they are taxed on and they pay it. Secondly, no one is asking for Facebook to pay tax on nothing. They should pay it on profits. It was tax payers money that built the Great British Telecommunications Infrastructure that Facebook 100% depends on for it's operations here. > 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. No one is going to give up all the money they can earn in a country that has one of the lowest corporation tax rates in the world. Facebook is not going to convince it's key employees to leave Britain, uproot their families and go live in the desert or china. Any threat by a company to leave one of the strongest economies in the world is a pathetic bluff.
- marknutter 11y ago
  > First of all, that's Facebook employees paying tax. Not Facebook. That's their money that they are taxed on and they pay it. Why is this distinction even relevant? Facebook then needs to pay its employees more to make up for the difference. No matter who the government taxes, everyone involved will shift their habits to compensate for it.
  - netfire 11y ago
    It's relevant because companies that are not multi-national can't afford to engage in these sort of tax reducing practices. If you want to get rid of corporate taxes altogether, that would be different, but suggesting that it's okay for Facebook to pay less than other companies because their employees pay income tax doesn't make sense. The tax code should provide a level playing field for all companies. You shouldn't get a break just because you can afford to move money around the globe.
    - marknutter 11y ago

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.
  - drited 11y ago
    RSU = restricted stock unit whether you're in the UK or the USA.
    - spacecowboy_lon 11y ago
      Never heard of RSU's in the UK context - UK taxation depends on if its an approved scheme or not.
  - kd5bjo 11y ago
    An RSU is more like a stock grant than a purchase option -- the company provides shares of stock to its employees according to a vesting schedule. The fair market value of the shares at the time of vesting is considered income, and there is no cost to the employee (other than income taxes). I don't know if this is a US-only arrangement, or if it's used in other countries as well.
  - ropiku 11y ago
    The other repliers added more info, sorry. You are correct about share options, on which your gain is only the price difference for which you pay CGT (or not). But the liquid tech companies (Google, FB, Twitter) give out direct stock which is taxed on their Fair Market Value at the time of vesting. RSUs are taxed the same way both in UK and US.
drited 11y ago
'If they hold them for 5 years there is no Cap Gains tax to be paid on the shares' Why not?

bkor 11y ago

That's why it has to be done across many countries so global companies cannot play one country against another. Your assumption that there are only two options doesn't apply.

switch007 11y ago

> 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 not pretend all 362 Facebook staff are paying tax via PAYE.

100timesthis 11y ago
maybe stupid question: do you expect a lot of fake contractors or there is another way? Because if they are contractors they wouldn't be part of those 362 in staff right?
- marrs 11y ago
  I think the parent is referring to contractors, who avoid PAYE but still have to pay dividend and corporation tax. The dividend tax rate is about to go up so the PAYE issue is about to become void.
  - switch007 11y ago
    Sorry, I was more thinking of the executives, whose large salaries would skew the average, and would have a complicated compensation package, and can afford accountants to do creative accounting. I do not know if there are executives included in that 362 employee figure.
    - marrs 11y ago
      oh right, good point. If only journalism wasn't in such a sorry state, we might know the answer to that question. They might be drawing a high salary, equally they might be drawing no salary at all and living as non doms.
robk 11y ago
I'd be happy to pretend that. Most of Facebook UK staff are actually employed here as high value employees (engineers, sales). I'd be very surprised if there were many contractors here in the UK.

crdoconnor 11y ago

More trickle down economics! Is it 1992 again?

domfletcher 11y ago

The thing is that is the employees that pay the the income tax _not_ Facebook. Facebook (and others) are still not paying the taxes on the the income they earn from operating in the UK no matter how many people they employ at high salaries. The choice you present is a false one, the multiplier productivity effect that Facebook employees gain from operating in London as opposed to Dublin far outweighs what Facebook would end up paying in corporation tax under a more reasonable system.

marrs 11y ago
You forgot the VAT that Facebook's UK clients have to pay, the VAT Facebook have to pay on their expenses in the UK, the council tax that they have to pay on their offices, the pension and NI contributions they have to make, etc, etc. At the end of the day, they aren't a UK corporation, so why should their corporation tax by high? To be honest, it's hard for me to really form an opinion on this when the information provided by the media is so superficial. For that reason I tend to share mrkmcknz's sentiment. It all smells too much of the kind of trolling that's institutionalised in the media now.

s_dev 11y ago

Do you think they'd pay more or less tax in Dublin compared to £5k? Irelands 12.5% seems very reasonable considering its so close to its effective rate. France, Britain and Germany all allow massive write offs and loop holes that mean their effective rate is multiples lower than their stated corporate tax rate and this story will be forgotten by the Brits, Germans and French who'll turn around and repeat their condemnation of Ireland as a cheap tax haven when negotiating EU funding. Starbucks get away with the same thing. Amazon intentionally doesn't turn a profit and so evades this whole situation altogether. Anyway Facebooks EMEA is already in Dublin.

rmc 11y ago
It's always funny when Brits complain about foreign tax havens. The UK is a massive tax haven, with oodles of little overseas territories, or Isle of Man, or the Channel Islands.
- JupiterMoon 11y ago
  In general if we know about them (most people don't) we object to this just as much. NB the channel islands aren't strictly speaking a part of the UK.
- marrs 11y ago
  Neither the Isle of Man nor the Channel Islands are a part of the UK.
  - pjc50 11y ago
    Urgh. This is part of the problem. They're Crown Dependencies. They're neither fully independent countries nor part of the UK. They're accountable to their own local electorates but host a lot of firms doing business that's really in other countries. They're ideal tax havens. I am fond of the constitutional tweeness of Man, Sark, etc, but their situation really does need to be regularised.
    - spacecowboy_lon 11y ago

CraigJPerry 11y ago

It is right of the press to point out egregious transgressions. EDIT for brevity.

toyg 11y ago

> relocating to somewhere like Dublin Afaik Facebook is still overwhelmingly based in Dublin, employing three times as many as in the UK. They likely hire in the UK the bare minimum they really need. So yeah, they've already "relocated" really. This is the same for pretty much any European corporation, btw. Anyone who could leave for cheaper shores, did so in the '00s. What is left are the essential crews strictly necessary to the job of tapping one of the richest consumer markets on the planet. The "employment threat" is basically toothless nowadays anyway, because "new economy" numbers are ridiculous in the great scheme of things -- 350 jobs won't change much of anything.

notahacker 11y ago

I don't think it's advocacy of "aggressive taxation policies" to argue that the corporation tax bill for a profitable multinational earning millions in UK revenue ought to be higher than the income tax bill for an individual person on the UK average wage. YMMV. How many of Facebook's 362 UK staff would be unemployed for any significant period if they relocated to Dublin? How many would instead be adding value to a company that paid 20% corporation tax, whilst paying similarly high taxes on a similarly high salary?

marrs 11y ago
I don't understand what you're arguing for. If Facebook shut down UK operations then, for starters, Facebook would be paying no tax at all in the UK and Ireland would gain the difference. If the Facebook UK staff relocated to Dublin then the loss to the UK economy would be exponentially worse.
- mootothemax 11y ago
  >If the Facebook UK staff relocated to Dublin then the loss to the UK economy would be exponentially worse. Can anyone say that for certain? How do you know, for example, that the same staff they'd employ wouldn't end up working for a company that does pay a large amount of corporation tax, leaving the UK's tax coffers substantially better off than they'd be otherwise?
  - marrs 11y ago
    I'm not saying they wouldn't - I'm sure they probably would - but that wouldn't stop there being 362 fewer roles in the UK. If the industry in the UK continues to grow then yes we would be better off, but the fear is that more companies would learn from Facebook's example and relocate, taking the growth with them.

mootothemax 11y ago

>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. Why should Facebook get to enjoy an advantage over 36 companies employing 10 people each at a similar average salary? >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. You'd prefer every large company to be based in the UK and not pay corporation tax? Of course not. Personally, I think we're long overdue another huge waste like DeLorean coming along.

marrs 11y ago
Why should Facebook get to enjoy an advantage over 36 companies employing 10 people each at a similar average salary? Let's turn it around. How would you go about taxing a corporation that didn't make much profit last year
- mootothemax 11y ago
  >Let's turn it around. How would you go about taxing a corporation that didn't make much profit last year From the article: "[T]he firm also paid its 362 UK staff a total of £35.4m in share bonuses." That says to me that it'd be worth trying to figure out how to reconcile that against "a pre-tax loss of £28.5m."
  - the_mitsuhiko 11y ago
    So you should not be entitled to bonuses when you work in the UK office because the UK office does not have enough revenue to make up for the cost of the workforce, but the same people in the SFO office should?
    - mootothemax 11y ago
      >So you should not be entitled to bonuses when you work in the UK office because the UK office does not have enough revenue to make up for the cost of the workforce, but the same people in the SFO office should? 1. I didn't say that. 2. What's to stop the SFO office issuing the bonuses?

tomelders 11y ago

I utterly reject this argument > 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. First of all, that's Facebook employees paying tax. Not Facebook. That's their money that they are taxed on and they pay it. Secondly, no one is asking for Facebook to pay tax on nothing. They should pay it on profits. It was tax payers money that built the Great British Telecommunications Infrastructure that Facebook 100% depends on for it's operations here. > 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. No one is going to give up all the money they can earn in a country that has one of the lowest corporation tax rates in the world. Facebook is not going to convince it's key employees to leave Britain, uproot their families and go live in the desert or china. Any threat by a company to leave one of the strongest economies in the world is a pathetic bluff.

marknutter 11y ago
> First of all, that's Facebook employees paying tax. Not Facebook. That's their money that they are taxed on and they pay it. Why is this distinction even relevant? Facebook then needs to pay its employees more to make up for the difference. No matter who the government taxes, everyone involved will shift their habits to compensate for it.
- netfire 11y ago
  It's relevant because companies that are not multi-national can't afford to engage in these sort of tax reducing practices. If you want to get rid of corporate taxes altogether, that would be different, but suggesting that it's okay for Facebook to pay less than other companies because their employees pay income tax doesn't make sense. The tax code should provide a level playing field for all companies. You shouldn't get a break just because you can afford to move money around the globe.
  - marknutter 11y ago