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Corporate taxes: Facebook likes this

11th Mar 2016
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The Guardian reported last week that Facebook “could pay millions of pounds in UK tax after approving fundamental changes to its corporate structure in Europe”.

Cue the inevitable self-congratulatory victory lap by HMRC, sniping criticism from Labour and, most worrying, a complete lack of understanding from the public about what the hell any of this means.

In the midst of all this noise, I came across a fascinating fact: In 2014, Facebook paid £4,327 in corporation tax. Conversely, the taxman paid £27,000 for Facebook ads telling Britons to pay their taxes. Not a bad haul for Facebook, then.

Now, there’s a debate to be had here whether what Facebook did was “wrong”. I mean, technically, they did nothing illegal. But I think everyone can recognise £4,327 is a laughably low figure. It doesn’t stop there. Facebook paid out £35m in bonuses to its UK employees - but posted £28.5m in losses.

The tax affairs of large corporations have become a new kind arithmetic; an alternate reality where up is down and a profit is a loss.

To the public - that is, non-accountants not au fait with the ins and outs of tax - Facebook’s tax payments appear irrevocably wrong. High level arguments that say what Facebook did was perfectly legal is all okay, but I can’t help but feel that these kinds of debates don’t take general public perception into account.

Personally, the debate over tax avoidance often gets mired in old fashioned debates over right and wrong, but, for me, it’s more about fairness. Is it fair that ordinary small companies pay more tax than a Silicon Valley mega-corporation? Surely, that can’t be so.

The UK also has to accept its role as a very prominent state; a country that has the power to set the tone for international corporate taxation. By enforcing these norms, the UK can be a tremendous force for good. Our tax dealings here have a great resonance beyond our own shores.

No one suffers more from corporate tax jiu-jitsu than developing nations. According to Oxfam’s head of inequality Nick Bryer, these countries miss out on “at least $100bn every year that could pay for hospitals and schools” in tax revenue.

We can’t realistically lecture developing nations on their dysfunction, and simultaneously allow corporations to deprive them of the revenue they’d need to build a stable state. Poor countries don’t have a shortage of money; they’ve got an asset recovery problem.

We have to decide, as a country that wields great influence, whether we’re okay with that. If you are, that’s fine. If not, then the Facebook’s of our world need to pull out the cheque book.

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Head of woman
By Rebecca Cave
11th Mar 2016 17:23

If Facebook has no profits in the UK...

.. it won't have to pay corporation tax. Losses are generally set against future profits without limit (different rules apply to banks). So until Facebook has made enough profits to cover all the losses it made in the past (in the UK) - it won't have a ccorporation tax liability. I don't see any problem with that.

 

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