Facebook 'immoral' for paying tiny UK tax on £20m revenues

Oct 11, 2012

MP says social network 'benefits enormously' from UK's broadband infrastructure and should pay up


FACEBOOK has been accused of "immoral" behaviour and "taking the UK for a ride" after it emerged that it paid less in tax to the British exchequer in 2011 than it pays in annual salary to an average employee.
Facebook's accounts show that its London office paid its 90 UK-based staff an average of £275,000 each in 2011 while handing just £195,890 - in total - to the UK tax man, The Guardian reports.
The social network says it made UK revenues of £20.4m in 2011 – although an analysis by media research group Enders estimates that the true figure is more like £175m.

Facebook, like other US tech giants such as Amazon, is making use of a completely legal corporate set-up by which it diverts its UK sales through offices based in European countries with lower tax. For Amazon, it is Luxembourg; Facebook chooses Ireland.

In a statement the company said: "The information does not necessarily present a full account of overall global financial performance so it would be a mistake to draw any conclusions from these filings."

The Guardian says Facebook's spokesperson "appeared to admit that the published numbers showed little resemblance to how the business is trading".

Richard Murphy, of Tax Research UK, said: "The UK is being taken for a ride. Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it. The UK is giving the tax break and the Irish get benefit of all the tax on the sales."

Labour MP John Mann, who sits on the Treasury Select Committee, slammed the tendency of web giants to trade in the UK while contributing very little.

"It's disingenuous and immoral for these hugely profitable companies not to be paying tax in the countries where they are based and make a profit," Mann told The Independent. "They benefit enormously from the country's internet infrastructure but do nothing to fund it. It's like driving a car with no tax. We would not stand for it on our roads so why stand for it on the net?"

Mann suggests companies that derive most of their income from the internet should be charged  a "traffic fee" for using British infrastructure. "It could be modest," said Mann. "The British taxpayer is currently spending a fortune on upgrading the countries broadband network, something that these businesses will benefit from enormously. It's only right they should contribute."

Tax campaigners UK Uncut also chipped in, saying the government should clamp down on tax minimisation by large companies. "David Cameron and George Osborne have the power to stop big companies such as Facebook avoiding paying their fair share," said a spokesperson. "Instead, this government has shown that it is extremely comfortable with the wealthy getting wealthier whilst the dole queues grow."

Challenged on whether Facebook had chosen to base its European HQ in Ireland to reduce its tax bill, a spokesperson told The Guardian: "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."

Sign up for our daily newsletter

Disqus - noscript

I don't get this morality bit about paying tax. Either there is a legal liability for the payment of tax or there is not. I would bet that those who shout the loudest about what others should volunteer are those who themselves pay the least into the system! It would be most interesting to learn, who, amongst the complainants, actually pays more tax than the law demands! Anyone ready to reveal the extent of their generority?