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Facebook pays just £4,327 corporation tax in 2014.

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Comments

  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    Is this in advertising revenue?

    Maybe I'm impervious but dont think I've ever clicked on an ad that's popped up on facebook

    That and corporate Facebook pages.

    Facebook pay the tax they are required to do, paying less than many using the 'Double Dutch Irish Sandwich' (I kid ye not). If Governments want companies to pay more tax they should change the rules, something that they are actively seeking to do AIUI.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    The £4327 was a mistake. They meant to pay £100m but the accountant typed in 10e7. :rotfl:
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • stator
    stator Posts: 7,441 Forumite
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    It does indeed highlight how broken the EU tax rules are.
    If we had the same blanket corporation tax rates/rules across europe this wouldn't be an issue.
    Because we are in a free trade area with the EU+ you can't say to a company based in Ireland or Luxemburg "No, you can't sell advertising in the UK because you don't charge enough tax". So what they do is entirely legal and within the rules of the EU. It's Ireland and Luxemburg (and others) we should be blaming and forcing to adobt the same rates as everyone else, with no special discounts.
    It's another reason why Scottish independence can't be allowed. The SNP were planning to set up Scotland as a tax haven for British companies without them having to move revenue outside the GBP.
    Changing the world, one sarcastic comment at a time.
  • martinsurrey
    martinsurrey Posts: 3,368 Forumite
    stator wrote: »
    It does indeed highlight how broken the EU tax rules are.
    If we had the same blanket corporation tax rates/rules across europe this wouldn't be an issue.
    Because we are in a free trade area with the EU+ you can't say to a company based in Ireland or Luxemburg "No, you can't sell advertising in the UK because you don't charge enough tax". So what they do is entirely legal and within the rules of the EU. It's Ireland and Luxemburg (and others) we should be blaming and forcing to adobt the same rates as everyone else, with no special discounts.
    It's another reason why Scottish independence can't be allowed. The SNP were planning to set up Scotland as a tax haven for British companies without them having to move revenue outside the GBP.


    Germany's corporate tax rate comes out at about 30-33% (they have a regional element).

    To them the UK at 18% (in a few years) is a tax haven!
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    stator wrote: »
    So what they do is entirely legal and within the rules of the EU. It's Ireland and Luxemburg (and others) we should be blaming and forcing to adobt the same rates as everyone else, with no special discounts.
    .

    Hot topic at the moment.
    The Irish government, long criticized by other European countries and the United States for its friendly tax treatment of multinational giants like Apple and Google, on Tuesday announced a move that seemed likely to further incense its critics.

    Ireland, whose corporate tax rate of 12.5 percent is already one of the lowest in the developed world, said it would cut that rate in half for a new tax category — one covering revenue pegged to companies’ patents and other intellectual property.


    Companies that could be poised to benefit include Apple, Google, Facebook and Microsoft — all of which have significant operations in Ireland and have troves of intellectual property that might be eligible for the new tax treatment.

    Google and Facebook declined to comment on Tuesday, and Apple and Microsoft did not immediately respond to requests for comment.

    The new 6.25 percent rate would apply to a tax category that Ireland announced last year, which it calls a “knowledge development box,” and would be put into effect early next year. The category is meant to provide tax breaks for revenue and royalties derived from intellectual property held in a specific country.

    Other countries, including Britain, Luxembourg and the Netherlands, have created similar tax categories for intellectual property, often in the hope of enticing overseas companies to set up shop in their territories.

    But critics contend that the royalties paid on intellectual property under such arrangements often do not adequately reflect where the inventions were made or where the innovations generate the most revenue.

    Finance Minister Michael Noonan of Ireland, who announced the new plan on Tuesday, described the knowledge box and the low rate as a “significant enhancement” to Ireland’s corporate tax system.

    “This puts Ireland in the unique position to offer long-term certainty to industries planning their research and development investments,” he said. “The initiative adds a further dimension to our best-in-class corporation tax offerings.”

    James Stewart, an associate professor of finance at Trinity College, Dublin, said Ireland’s new approach would probably change the tax strategies of multinational companies — though not for the better.

    “This is complex, and multinationals love complexity,” he said, “because it allows them to develop tax avoidance strategies. The last thing they want is simplicity.”

    Over the last two decades, many American companies — tech giants like Facebook and Google, as well as nontech companies like the drugmaker Pfizer — have established sizable operations in Ireland, primarily to take advantage of the country’s low-tax tradition.

    Ireland’s corporate tax rates compare with a rate of 35 percent, before deductions, in the United States.

    But critics say the bigger issue lies in the special tax deals that Ireland made to entice multinational companies to set up operations there. Such deals have led to criticism from some global policy makers, who argue that companies are not paying enough tax.

    http://www.nytimes.com/2015/10/14/business/international/ireland-tax-rate-breaks.html?_r=0
  • N1AK
    N1AK Posts: 2,903 Forumite
    Part of the Furniture 1,000 Posts
    Cut Facebook UK off from accessing any of Facebook US, brand, IP or software, and how long do you think the company would last? In other words, spin off Facebook UK and you'd get nothing for it, as the value is generated in the brand and IP, which is NOT a UK asset.

    That would imply (fag packet) that the transfer pricing is reasonable.

    You're looking at this backwards. Cut Facebook UK off from the organisation and there profits would fall – A fair assumption if they're giving them £100k bonuses – thus the UK operation has value; Facebook's profits are made by selling highly targeted advertising, and the local operations manage relationships with advertisers.

    By your logic Facebook has no value because if they were kicked off the internet they'd be useless ;)
    Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...
  • martinsurrey
    martinsurrey Posts: 3,368 Forumite
    N1AK wrote: »
    You're looking at this backwards. Cut Facebook UK off from the organisation and there profits would fall – A fair assumption if they're giving them £100k bonuses – thus the UK operation has value; Facebook's profits are made by selling highly targeted advertising, and the local operations manage relationships with advertisers.

    I don't know where the advertisers are managed from (I'd be surprised if its in the UK, with only 362 employees and an average salary of £240k, the highly targeted advertising you talk about is targeted using the algorithms developed in the US to match what we say and do to what we buy, which is how the value of the adverts are generated.

    lets look at an example with your way of thinking...

    Bentley UK builds a car, including the research and development of that car it costs £100k, they employe 10,000 people in the UK who worked on it. They export the car to Germany and sell it for £200k, from a show room in Berlin, which employs 10 people.

    Where should the tax be paid?

    The sale was generated in Germany (like Facebooks UK sales), if Bentley were taxed in Germany on the £100k profit for the car, either 1) Bentley pays double tax 2) the UK doesn't get any tax even though the value of the car was generated in the UK.

    What actually happens is Bentley UK sells the car to the German dealer at £180k (making a UK profit of £80k, and the German dealer then sells is on for £200k, taking a slice of the profit, which he pays his expenses with, meaning he makes VERY little profit in Germany, and thus pays little tax in Germany, as its not a value added service.

    why should Facebook be any different?

    N1AK wrote: »
    By your logic Facebook has no value because if they were kicked off the internet they'd be useless ;)

    Yes, and if one company controlled access to the internet, it would charge Facebook so much that they wouldn't make much money and they would, as they are the ones with the IP. Much like Facebook US is the one with the UK used IP.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic

    why should Facebook be any different?

    Globally Facebook makes a 20% profit on turnover. Are you suggesting that the UK is barely profitable as a market?

    Like many US Corporations Facebook operates from Eire.
  • martinsurrey
    martinsurrey Posts: 3,368 Forumite
    Thrugelmir wrote: »
    Globally Facebook makes a 20% profit on turnover. Are you suggesting that the UK is barely profitable as a market?

    did you read my example?

    So in my example on sales in Germany of £200k, Bentley should pay 20% tax on that in Germany?

    Show me using the numbers in my example how you want Bentley to pay tax.
  • I don't see any problem with the way this was reported. It IS newsworthy to know that for these massive companies a lot of taxes are largely optional. Clearly basing taxation on turnover isn't acceptable as you could have a large turnover but make no profit but equally companies like Facebook, Amazon and Goggle are extracting the urine somewhat.
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