Facebook accused of ‘picking and choosing’ tax rules after paying just US$5 million in the UK

The social network’s turnover in Britain last year was more than double what it recorded in 2014

PUBLISHED : Monday, 10 October, 2016, 5:07pm
UPDATED : Monday, 10 October, 2016, 5:11pm

Facebook ended up with an £11.3 million (US$14 million) tax credit in the UK last year, which more than offset the amount it was charged, according to a new company filing, adding to concerns that the social media giant isn’t paying enough into the country’s coffers.

The US social network paid £4.1 million (US$5.09 million) in tax to the UK in 2015, a sharp rise from the £4,327 (US$5370) in 2014 that sparked outrage from campaigners, accounts filed with Companies House showed.

But it reported a tax credit of £11.3 million for the year, which effectively can be used to offset future payments. The credit stemmed from tax rules linked to an employee bonus programme at Facebook.

Facebook did not immediately respond to a CNBC request for comment.

Facebook’s accounting practices were in line with UK rules, but critics slammed the US firm, which has a market cap of US$371 billion.

“Facebook UK’s accounts show specific issues, but point also to the real problem: that major multinational companies appear to be able to pick and choose, unlike the rest of us, where and how much tax they will pay,” the campaign group Tax Justice Network said in a statement on Sunday.

The company’s activity in the UK – where it had 854 employees at the end of 2015 – is mainly focused on sales support, marketing and engineering. Facebook’s turnover in Britain amounted to £210.7 million (US$261.5 million) in 2015, up from the £104.9 million (US$130.2 million) recorded in the previous year. But it recorded a loss after tax for the year of £41.1 million (US$51 million), which widened from the £28.4 million (US$35.2 million) booked in 2014.

Despite this, Facebook made profits of US$3.7 billion globally in 2015 on revenues of US$17.9 billion.

The filing of the accounts comes as big businesses’ tax procedures are in the spotlight once again. Last week, UK Prime Minister Theresa May sent a warning to businesses who dodged paying tax, telling them that the government is “coming after you”.

“If you’re a boss who earns a fortune but doesn’t look after your staff, an international company that treats tax laws as an optional extra, a household name that refuses to work with the authorities even to fight terrorism, a director who takes out massive dividends while knowing that the company pension is about to go bust. I’m putting you on warning. This can’t go on anymore. A change has got to come,” May said in a speech.

Facebook has made moves to change where its taxes are booked. In March, it said it would no longer route advertising sales made by its UK team through Ireland, and instead record them in Britain. This began in April and is likely to boost revenues for 2016, which will show up in accounts filed in 2017.

Authorities globally are trying to clamp down on US technology companies’ tax practices. In August, the European Commission, the European Union’s executive arm, ordered Ireland to claw back 13 billion euros (US$14.5 billion) in back taxes from Apple. Google meanwhile agreed to pay the UK £130 million (US$161.3 million) in back taxes earlier this year.