
Facebook paid £4,327 corporation tax in the UK in 2014 - unfunco
http://www.bbc.co.uk/news/business-34504474
======
jkahn
Global companies offshoring profits and not paying enough tax (in the eyes of
many countries) was a hot topic at the last G20 summit in Brisbane.

This isn't limited to Facebook, as the article explains. The issue and
background here is that when large companies operate globally, each country
has its own local subsidiary, owned by the global entity. Money is made in
each country by selling goods or services. How are the profits sent upstream
to the parent company? By charging costs for goods; or license fees for
services. As the company chooses their own costs and license fees, they can
effectively control in which entity they make a profit and which they don't.
This is also how companies shift profits to no- or low- tax jurisdictions.
See: Apple and their large amounts of cash held outside of the USA.

With increased globalisation, this is an issue for many countries. In
Australia, for example (where I live), the roll out and success of Uber means
that the taxi company tax base will erode. If Uber shifts profits overseas,
the Australian Government gets less tax but still has to provide the same
level (or greater) services. Uber's a better service, we want it to succeed,
but tax is needed for necessary services.

While companies continue to do this, the answer is information sharing between
countries' tax offices and laws to ensure a certain amount of profits must
stay on-shore, while not dis-incentivising multi-nationals from doing business
in each country. As this already has political attention, I'd expect laws in
most major countries to deal with this over the next 5 years.

But Facebook are taking the piss here.

~~~
phlo
Stories like this make me question if corporate tax even makes sense. However
well designed, a tax code with today's complexities is going to have holes. If
a savings of even one per mill may mean millions, corporations are going to
spend insane amounts of money to hire the best experts to use every last
loophole.

Why don't we cut down everything to a couple of manageable groups that can be
tightened down? I think the following set of taxes should capture mostly
everything:

\- Personal income including gifts, inheritances, capital gains, all on a set
of progressive scales. This should include work benefits (like company cars)
and probably include loans taken out.

\- Use of public resources (property tax, vehicle registration tax, RF
use...), taxed based on the specific usage (e.g. vehicle weight, or even
kilometers driven).

\- A consumption tax (VAT) could be added, although this doesn't seem
necessary to me.

Thinking about this for a couple of minutes, I don't see any obvious problems.
Applicability of the personal income tax would be a crucial point, and care
would need to be taken to avoid loopholes. Why aren't tax systems as simple as
that?

~~~
jos3000
The big problem with this is that, under a simple tax system, if a government
wants to increase it's tax revenue it is extremely easy for voters to
understand what is happening. Governments prefer to make complicated tax laws
because they are easier to spin.

~~~
vtlynch
Ah yes governments always trying to make things too complicated!! Argh! Why
cant we replace the govt with the private sector! They never do anything that
would obscure or needlessly complicate things.

------
TomGullen
TIL we pay 10-20x more corp tax than Facebook.

Sometimes I feel like a fool, but we've always said from day 1 try to do
things as honestly as possible which I'm quite proud of, but there really
doesn't seem to be much practical upside apart from not being outed and
shamed.

First world problem I guess, at least we're turning a profit.

It is starting to make me a bit bitter though. For example, we've spent a LOT
of time making sure we file and pay the full VAT due on all our sales which is
insanely complicated. Then we suffer further with the new VAT Moss rules which
are aimed at targeting these big businesses who are avoiding it as best
possible, but the end consequences being an even bigger burden for small
businesses like us.

Makes me wonder if we decided to exit if we could get a higher multiplier.
Firstly we represent a reduced risk to the buyer, and secondly the buyer might
see it as opportunity to absorb us into their accounting practises which would
make us significantly more profitable overnight. I guess that is a potential
benefit, but the idea of it ending like that doesn't sit comfortably with me.

~~~
jkahn
You're not a fool, you're just not a multi-national with the ability to
legally avoid/minimize tax.

~~~
TomGullen
Along the way we've been offered ways to get around this and that which we've
politely declined. Most obvious one being put your HQ in some country you've
never been to in your life, we'd save buckets.

Also, if you get down to the metal with VAT there's a lot of ambiguity
(opportunity).

My experience is that scale is not a prerequisite for it being economically
beneficial.

~~~
arethuza
They didn't suggest "paying" yourself by loans from the offshore entity did
they?

~~~
TomGullen
I don't believe so.

------
stegosaurus
Re-posting my comment from the Guardian thread that came up earlier (
[https://news.ycombinator.com/item?id=10371728](https://news.ycombinator.com/item?id=10371728)
)

Corporation tax in the UK is payable on 'profits subject to corporation tax'.
In laymen's terms this is roughly equivalent to to accounting profit.

Employee salaries, bonuses, etc are generally deductible; if you pay me 50K,
that's 50K out of your bottom line.

The employees in question likely pay a variety of taxes including but not
limited to the standard income tax. In an extreme scenario (recent graduate +
highest tax band) that could be 61% rate.

(For comparison, the 2015 rate for Corporation Tax is 20%; so as far as the
Exchequer is concerned, a salary payment is preferable, at least in immediate
terms).

In summary, I think there's a discussion to be had here about abuse of
taxation frameworks but the headline here is bait; the bonuses are irrelevant,
any oddities regarding transfer payments etc. are what should be focused on.

edit: My position on taxation in general is that we should be focusing on
Capital Gains Tax (taxes the gain on appreciation of assets such as shares)
and Income Tax (taxes income from sources such as employment, share
dividends).

Taxing corporations seems like it can only ever be arbitrary at some level,
because they don't.... 'exist', for lack of a better term. They can be
ephemeral, relocate, etc.

~~~
TomGullen
What about scrapping corp tax, and replacing with a higher VAT rate?

~~~
petercooper
The public would go mental. VAT is seen as being most onerous on low earners.

Something like a very low "turnover tax" for businesses could potentially work
though.

We take about £40bn in corporation tax each year. Total business revenue in
the UK is around £3.2tn, so a 1.25% turnover tax would cover it.

~~~
tonyedgecombe
Or just tax dividends as normal income.

~~~
petercooper
We are not far away from that with the new regime, but ultimately that's
mostly disproportionately onerous on small, risk taking entrepreneurs and
small businesses.

~~~
tonyedgecombe
For those people they would clearly stop drawing dividends as there would be
no tax advantage to doing so. I'm not sure how you could say it is onerous
(other than the fact they may have to pay more tax than they would have).

~~~
petercooper
For right or wrong, the British tax code has long recognized that those
putting their own capital at risk do not necessarily have the same safety nets
of typical employees and taxes their rewards at a lower rate. This is why both
dividend taxes and capital gains taxes are lower than income taxes, and also
why Entrepreneur Relief exists.

------
mrkmcknz
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.

~~~
tomelders
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
> 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
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
If we got rid of corporate taxes altogether it _would_ be different, and it
would likely "provide a level playing field for all companies". And I'm not
sure why companies that are not multi-national can't afford to do this too..
if their corporate taxes are absurdly high like they are here in the U.S.,
they are free to offshore their operations just like U.S. companies do, or
lobby their government to reduce or eliminate corporate taxes altogether. In
that respect, the playing field _is_ level because the global economy is now
the playing field.

~~~
netfire
This just isn't true. Small businesses can't afford to hire accountants and
set up and manage global offices and tax codes. That means small companies are
disproportionately taxed for their profits.

In addition, isn't the whole point of corporate taxes to provide money to the
country in which that business is making a profit? We may live in a global
economy, but we don't all live in a single country. Businesses should be taxed
appropriately for their revenues in a country or not be taxed at all. Saying
that it's okay to avoid paying taxes because you can afford to move money
offshore is hardly a level playing field and gives money to countries based on
their advantageous tax codes, not to the profits achieved in that country.

------
DanBC
No-one expects companies to pay the full whack of tax. But Facebook is taking
the piss. They need to be a bit careful, because they risk causing much
tighter tax regulation in EU.

Citizens don't see this behaviour and think "well done, got one over on the
government". Most citizens are infuriated by this scumbag behaviour.

And before anyone says "they're just obeying the law" \-- we don't know that.
They're clearly not evading tax, just aggressively avoiding it, but some tax
avoidance schemes haven't been tested in courts yet.

~~~
amirmc
> _" No-one expects companies to pay the full whack of tax."_

Why? I don't understand why this is considered acceptable. I'm expected to pay
the full whack of tax (income, VAT, etc), but somehow it's taken as given that
corporations will pay 'less than they're supposed to'. How can we fix anything
if this is the prevailing attitude?

~~~
Cakez0r
In this case, Facebook did pay the full whack of tax. The article implies they
avoided paying corporation tax by paying out large bonuses, causing them to
have been operating at a loss (on paper). If that is the case, then I don't
think that's such a bad thing. All of their employees will still pay tax on
their bonuses, so it's not like the tax payer is being completely robbed. At
least their workers are getting a cut of the profit, rather than having it all
go to Facebook's coffers and the government (in the form of corporation tax).

------
bnastic
My one-man-show consultancy pays far more than that in UK corporation tax. Of
course that pisses me off, regardless of how you paint this whole tax
avoidance scheme.

Someone said that "paying tax is for poor", and this goes a long way to
support it.

~~~
scanr
An alternative point of view: if your one-man-show consultancy was not IR35
compliant, paying corporation tax instead of NI and PAYE (i.e. salary) would
be a sign that you're avoiding tax.

------
pja
So they paid next to no corporation tax. Meanwhile their employees will have
paid a stack of income tax & the new rules on VAT should mean that all
Facebook Ad sales to UK customers are subject to UK VAT.

I don’t think the UK is being shortchanged all _that_ much. When Google/FB et
al were able to shift Ad sales to low-VAT regime holding companies, _that_ was
definitely taking the piss. This? Meh.

~~~
JupiterMoon
This argument is not valid. Yes they are paying VAT and income tax. So what?
They should also be paying corporation tax. A start up competitor would have
to pay VAT, income tax _and_ corporation tax.

~~~
ghiculescu
Not if that competitor made a loss the way facebook has here.

~~~
tonyedgecombe
That wouldn't be an option in the way it is to Facebook if the competitor was
based wholly in the UK.

------
kuyfiuyg
I'm asking someone who is more knowledgeable than me on this topic. What would
happen if you replace all (most) tax with VAT?

That would mean everywhere there is a real transaction, that generates greater
value, that is where the tax is. It would also make it impossible for big
companies to do tax evasion - since you limit the effects to the 'leaves' of
the tree that is the economic system, you can catch the money before it
escapes put the company 'tree' structure, out of the reach of the state.

~~~
vidarh
The issue with VAT is that as usually applied it is an extremely regressive
tax. Poorer people spend a far higher proportion on their income on purchases
that have VAT applied. If more categories of basic goods were zero-rated or
exempt, or if other mechanisms were used to make the VAT burden less
regressive, then it might be viable.

~~~
lagadu
That's how most of Europe does VAT: food, cultural and other essential
products enjoy a very reduced VAT rate in many (but not all) countries
here[1].

[1] [https://en.wikipedia.org/wiki/Value-
added_tax#Tax_rates](https://en.wikipedia.org/wiki/Value-added_tax#Tax_rates)

~~~
rmc
There can still be VAT for things poor people buy. Is there chocolate on your
biscuit? Then it's "luxury" and you have to pay VAT.

~~~
lorenzhs
True, but at least the price label in the supermarket is the final price you
pay, no nasty surprises at checkout. VAT is already included in the advertised
price, so you know exactly how much you'll have to pay. Apparently, the same
is not true of sales tax in (some states of?) the US.

It doesn't say the VAT rate on the label, but you can figure that out from
your receipt after solving a bin packing problem :) Receipts contain a listing
of the different VAT rates (e.g. in Germany, x€ at 19% and y€ at 7%)

~~~
rmc
> but at least the price label in the supermarket is the final price you pay,
> no nasty surprises at checkout

Er, that's how nearly everywhere does it. And is irrelevant to whether VAT or
income tax should be the main way to raise money

------
nevi-me
From my tax knowledge, in South Africa it's difficult to get away with paying
ridiculously low amounts of tax consistently. The corporate tax rate is 28%
taxed on worldwide earnings. Though you prepare returns as a single entity
(i.e. each subsidiary files its returns and the holding company would also
file its own return), there are transfer pricing provisions, as well as
provisions for connected persons (related parties/companies) that make it
difficult to just keep 'profits' in Ireland without paying taxes on them.

If I could argue that if FB was headquartered in SA it would be paying at
least 20% effective taxes, then surely the issue would be that the specific
countries (US and EU) have lenient tax laws. Companies will keep gaming the
system if lawmakers don't have the appetite to ignore company lobbying and do
what's best for the income of their countries.

Whether the issue is that they don't want to lose the business of these tech
companies is something else. South Africa started imposing VAT on digital
services sold by foreign companies last year. As a result my Google Play Music
subs started costing me 14% more, funny enough as I technically shouldn't even
be having All Access as I'm in an 'unsupported country'. Apple still charges
me the same for music, which means someone had to take the loss to keep the
value the same. Nonetheless, some people are unhappy, but our country gets to
benefit with the extra 14% collected.

------
oliwarner
It's a good headline but in this case, HMRC made somewhere between two and
five times as much money through Facebook's accounting choice here than had
they kept the money as corporate profit.

That's because the Facebook paid out those profits to employees as bonuses.
That wiped out the corporate profit but the employees have paid income taxes
which are much, much higher than corporation tax.

This is significantly different from the corporate tax dodging companies like
Amazon EU do by bribing EU states into letting them have a super-low corporate
rate if they put all the EU books through that country. Not saying that
Facebook aren't also doing that, that's just not what this is about.

~~~
to3m
I wonder what the response would have been had it turned out Facebook were
going to pay their employees less, because they'd be making more profit that
way ;)

------
something123
Am I alone in thinking corporation tax is idiotic?

I think corporations are incredibly immoral institutions (due to skewed
incentive structures), however - ultimately it's a collection of investors,
owners and employees.

Why not be honest and tax the corporations on the outflow of capital? ie.
dividens, wages and sales tax

Corporate tax is ultimately a populist hidden tax on the whole economy b/c no
one "feels" it. If you raise it everyone will whoop and cheer (b/c fuck big
co!) and not appreciate it's impact on salaries or retirement funds.

Maybe I'm missing something?

------
cpursley
Corporations don't pay tax even when they do. The tax is a cost passed on to
the end consumer. I'd rather see a combination of a progressive consumption
tax (necessities < luxuries) combined with trade tariffs that's appropriate
for the country being traded with. This would circumvent the shell company
trick.

~~~
throwaway2048
The idea that all taxes are just costs passed onto the consumer is patently
abusrd, if they could easily raise prices to that level and have people pay,
they already would have. It effects profit margins much more than it does the
prices they set.

------
JupiterMoon
The thing that large corporations should remember is the the UK is one of the
few countries in the world that can pass retrospective legislation and then
enforce it (this has happened on tax issues as recently as the 2000s). At some
stage a UK government is going to claw back this money and I think it won't be
pretty for anyone. (NB I fundamentally don't agree with the concept of
retrospective legislation I'm merely saying the UK can do it.)

~~~
shrikant
I found this _ex post facto_ -ing, so I dug up a relevant link:
[http://news.bbc.co.uk/2/hi/business/8496921.stm](http://news.bbc.co.uk/2/hi/business/8496921.stm)

The law in question is the Finance Act of 2008.

------
elicox
I don't know if is the case of Facebook, but in general this is the story of
most of tech companies, all are located in Ireland where they pay so much less
taxes, and in rest of EU countries all this big companies pay this quantities
or in the worse case the government return money.

EU is totally broken, one market with one tax per country; Obviously, all
companies go to the country with less taxes. And the different is not 1% or 2%
is like 10% or more.

~~~
rmc
> all are located in Ireland where they pay so much less taxes

Another reason for Ireland was that there was a very lax view of European Data
Protection law there.

------
maccard
> Its most recent Companies House filing shows the company as making a pre-tax
> loss of £28.5m last year, but the firm also paid its 362 UK staff a total of
> £35.4m in share bonuses.

So £35m was distributed as income towards the employees. This means the
employees are paid extra, have more money to contribute and spend locally, and
have paid the correct income taxes on the bonuses. How is this a bad thing?

~~~
DanBC
Facebook reaps the rewards of the UK infrastructure. Facebook should behave as
a responsible citizen and help fund that infrastructure.

If they don't want to behave like responsible citizens they can fuck off.

~~~
maccard
> Facebook reaps the rewards of the UK infrastructure. Facebook should behave
> as a responsible citizen and help fund that infrastructure.

Paying their employees an extra £96,000 (on average) per head isn't them being
responsible? The money is being paid to UK employees who will (in theory)
spend it in the UK. I'd have a problem if they did what Apple are doing in the
US - sitting on wads of cash because it's too expensive to bring it back into
the states, but this is a win for everyone. The money is redistributed back to
the employees, and taxed appropriately, how is that a problem?

~~~
throwaway2048
its only responsible in the sense that they have to pay the caliber of tallent
they want to attract that much. Its not like facebook is paying them more out
of the goodness of their own hearts.

Also you can make the arguement that its the employees themselves paying these
taxes, not facebook.

------
joesmo
What's the point of having a company like FB or Starbucks in your country if
they're an incredible net loss to the economy? Why not stop attracting these
kinds of businesses or even actively seek to kick them out? I mean, assuming
that fixing the tax laws for corporations is impossible, which I think at this
point is a fair assumption.

With numbers like this, it'd be easy to morally justify looting, and other
otherwise criminal activities against both these types of corporations and the
government that allows them existence. It'd seem to start tearing down at the
social fabric in many countries, not just the UK, where the poor are actually
taxed more than these corporations. With just a little more poverty and
misery, I wouldn't be surprised if at some point we started seeing violence
and social upheaval as people realize they have no other recourse.

And who could blame people if they reacted this way?

------
inthewoods
FB is playing the game that corporations play all over the world - global tax
arbitrage. They shift operations, losses and profits to different countries
based on tax policy.

The similar thing happens here in the US at the State level. It isn't uncommon
for large companies to pack up and move their operations to lower tax States,
or to actually bargain with individual States over who will give them the best
deal. Here in Massachusetts, Fidelity packed up and left for North Carolina
and Texas - they found it was cheaper to move employees than pay the taxes.

This will likely continue as long as different countries (and States) have
different tax schemes - and that isn't going away anytime soon.

Soon we'll probably have a renewed call for a lower tax rate here in the US
for companies to repatriate those revenues.

~~~
ptaipale
Tax policy, but not just tax policy. Companies also place their operations
based on cost (total operating cost, including logistics costs and whatever).
For instance, it is not a surprise that so many computers and smartphones are
made in China.

~~~
inthewoods
Completely agree - but if you look at these global companies, many just locate
their headquarters in tax-free zones while not having a substantial amount of
employees, or engage in tax avoidance strategies like the Double Irish. But
you're right - it's not typically only for tax reasons.

~~~
ptaipale
Another reason is that tax havens (such as Cayman Islands, or within EU also
Luxembourg or London) often have substantial amounts of financial services -
lawyers and other experts are available. So, for the logistics of running
headquarter functions, it's not necessarily that taxes are low, it's also that
there's available expertise for operation.

------
snorrah
Shameful. Just shameful. I don't care how it gets sugar coated, if you claim
to be working for the good of humanity (in facebooks case by connecting people
together) and then you loophole yourself out of paying taxes, you are morally
bankrupt.

~~~
ams6110
If the tax law allows it, they have no reason to pay more than they do. To do
so would be not in the interests of their owners/shareholders.

If you have a problem with tax "loopholes" then fix the tax law. Don't blame a
business for paying only the tax it is legally obligated to pay. Would YOU pay
more taxes than you have to?

~~~
DanBC
>Would YOU pay more taxes than you have to?

Most people pay more tax than they need to because they don't have access to
devious accountants who create excessive tax-avoidance schemes.

Most of these schemes are neither normal tax planning nor a bit of tax
avoidance. They are aggressive tax avoidance that exploit the regulations in
weird ways. They're legal, but only because the regulations were malformed
(and will get re-made) or because the schemes haven't been tested in courts.

And the way UK tax authorities work is rightly to use courts as a measure of
last resort, preferring negotiation instead.

------
forrestthewoods
Excellent. Paying the smallest amount of taxes one is legally obligated to pay
is one of the most noble of endeavors.

If every country got their "fair share" of revenue the total taxes on $1.00
would be approximately $1.50.

------
buro9
I worry about the drip-drip-drip of information that the British public can
(and probably will) use to end up at the conclusion that leaving Europe in the
future will be the silver bullet to all of the issues.

Immigration from Europe > Leave Europe (we're an island!)

Can't deport or be cruel to alleged terrorists > Leave Europe (we don't need
the European Convention on Human Rights)

Can't stop corporations playing the tax system > Leave Europe (the borders
become hard, the taxes unavoidable)

Our press don't really need more reasons to whip up the anti-EU mob, corps
shouldn't help them do so.

------
kevindeasis
Not from me: As an accountant, most people are not going to be happy with my
comment, as it goes against the Group Think here, but this number likely makes
sense for the following reasons: 1) Facebook is an American company so
discussing up its U.K. Income tax is click bate, pure and simple. American
companies pay the majority of income taxes to the US, of which Facebook had at
$1.9B tax bill in 2014. 2) there are very complex cross-border income tax
rules, where at a high level, other countries will make a corporation pay
income tax on business income earned in its country. However, it says right in
the article, Facebook UK had a taxable loss last year, and in most
jurisdictions you can use prior year losses to reduce current year taxes
payable, which is likely what is happening here. 3) they would be paying a lot
of other taxes to the UK government. The article mentions employees meaning
there will be a host of payroll taxes. There would also be sale tax. The
article implies shirking the system, but believe me, governments want and get
their money. In summary, this article is click bait trying to get people angry
at things they do not understand unless you work as an accountant or tax
lawyer..

Source:
[https://www.reddit.com/r/worldnews/comments/3ofo13/facebook_...](https://www.reddit.com/r/worldnews/comments/3ofo13/facebook_paid_4327_of_uk_corporation_tax_in_2014/cvwz9ft)

------
radu_floricica
Tech companies don't show profits as long as there's place for development.
They're still paying tax on everything else, including renting offices, paying
salaries and bonuses etc.

~~~
DanBC
> paying salaries

Isn't that a tax paid by the employee, not employer?

Starbucks tried to say that they paid a lot in VAT, but that's a tax paid by
the customer not the business.

~~~
radu_floricica
> Isn't that a tax paid by the employee, not employer

I don't know why people still fall for this. The government may say whatever
it wants, but the value of the paycheck is market determined which means taxes
are taken from both sides. Unequally, of course, depending on how (in)elastic
work supply and demand are.

~~~
spacecowboy_lon
But of course Starbucks claims VAT back so the net VAT paid to the UK
government is not the same as the gross

------
ryanmac
"It's about the spirit of the law versus the letter of the law. At the end of
the day tax evasion is illegal, when you're deliberately setting out to not
pay your tax by hiding your money,"

This is so wrong. Close these loopholes so a million dollar accountant and a
regular accountant play by the same rules.

It's as if a soccer didn't have an offsides rule and then some complained
about teams taking advantage of offsides. Change the law and move on. Don't
complain about companies exploiting a huge hole you created.

------
evanpw
So...the employees likely pay a larger amount in income taxes than Facebook
would have paid in corporate taxes, and the remainder goes to the actual UK
employees rather than shareholders in the US. Isn't this the best possible
outcome for the UK? Is this article just pure mood affiliation (greedy
corporations!), or is there something I'm missing?

------
laichzeit0
Trump's solution? Cut the U.S. corporate tax rate to 15% from the current top
rate of 35%. This would make corporate inversion unnecessary. I think he also
had the idea of capping tax at 10% for companies wanting to bring their money
back.

At some point you have to ask yourself "why are companies doing this?" and fix
the root cause.

~~~
te_chris
Creating a race to the bottom is the opposite of fixing the root cause. The US
already has a way to deal with this as it's the system used internally between
states: levy taxes where sales happen.

~~~
laichzeit0
So the idea is to punish corporates into submission instead of making it so
cheap to do business in the USA they don't wanna go elsewhere?

------
3dfan
The article is ultra thin on informations. What is the news? That FB UK
transfered profits out of the UK to avoid corporation tax?

Is that a problem? I honestly don't know. What is the intention of corporation
tax?

I would think that the "who uses our streets and is protected by our police
has to pay for it" tax is VAT. How is FB doing in terms of VAT?

------
lifeisstillgood
There are several main pain points :

\- companies need to be treated as "unitary" \- that is passing profits around
internally should not affect the tax paid

\- profit is the least definable of all measures. Revenue is something
companies don't like to lie about.

\- this change will have to come to small and even consumers to be fair (my
wife and I are a unitary item ? Can we share tax allowances?)

\- even if we decide on treating companies as one black box, choose a better
metric to tax on (revenue, dividends) we still do not have a formula for
distributing across national borders. Should the US get all Facebooks profits?
No. Should Facebook pay UK based on number of UK users it has? Doubtful. So
....

We are not going to see this end well - unitary treatment seems obvious but a
international agreement on how to divide tax will need another two world wars
to sort out.

------
david_mitchell
The basic problem here is that business is now global whereas taxation is
still at the nation state level. Countries have to compete for business and
smaller states with limited resources can bring in money by becomming tax
havens. I don't really know of any solution to this.

I think it's worth pointing out that even from the perspective of most
businesses this situation sucks. Smaller companies or startups lack the
resources to benefit from tax avoidance schemes so are at a disadvantage to
their larger competitors.

And if you do start a company that is growing large you don't really have much
choice but to start doing it too. You won't be able to compete if you are
paying 20% and the competition is paying 2%. You have to do it because
everyone else is doing it.

------
denysonique
Less taxes == more money in our pockets. Facebook higher taxed == FB Ads more
expensive == Higher product prices for the consumers

Taxes are always as result paid by the consumers/employees, never by
"businesses".

Money saved by Facebook corresponds to money saved in our pockets.

------
tim333
They should have a new tax where a companies profits are estimated globally
and then a percentage of that is allocated to the countries where it trades
based on the amount of trade done there. So if facebook's global profits are
$2.9bn and it does 50% of trade in the US then it should be taxed as having
made 1.45bn there and then pay US tax (35%) there so $507m there, even if they
claim all the profits were made in some tax haven.

It seems a simple solution but there is probably not much lobbying money in
the politicians bringing it about.

------
kriro
I'd kind of like to spend a day with the people who think up these schemes and
pick their brains (lawyers, accountants, CFOs, whoever works on this). Not
because I want to "optimize taxes" but because I'm genuinely curious about how
they tick, if they see it as a game of sorts etc.

You have a complicated legal framework and try to optimize in it. At the end
of the day I'd still wonder...gee is it "ok" that we pay only that much but
like I said I'd like to see how this general problem is approached.

------
United857
As others have pointed out, this is far from unique to FB. I'd be surprised if
any large multinational corporation didn't do such creative "optimizations"
globally.

E.g. British companies doing the same thing in the US:

[http://www.washingtonpost.com/wp-
dyn/content/article/2006/09...](http://www.washingtonpost.com/wp-
dyn/content/article/2006/09/11/AR2006091100429.html)

Don't hate the player, hate the game.

------
callesgg
Thats why you get some good finance people, to use the system against itself.

Aslong as it is legal great, mabye the UK should fix some tax laws if that is
the case, if it is not legal fine them..

------
ac1294
The £4,327 tax is only talking about the UK subsidiary, right? Because from
their income statement [1], they paid $1.97B in income tax on $4.91B income
before tax for a rate of 40.12%.

I might be misinterpreting something, but I think we should be careful to
accuse them of abusing loopholes if they're still paying such a high rate
overall.

[1]
[http://finance.yahoo.com/q/is?s=FB&annual](http://finance.yahoo.com/q/is?s=FB&annual)

------
lukasm
Why not reduce corporate income tax and add 1% revenue tax? If you can't
afford 1% you are gonna go bust anyway.

~~~
hawkice
So, the generic answer for why we favor income or value-added taxes over
revenue taxes is that (1) we want to encourage investment, so marginal
business expenses are essentially tax-free, and (2) revenue taxes limit the
ability for competitive middlemen (who can lower transaction costs) and give
massive advantage to vertically integrated semi-monopolies.

~~~
lukasm
Sure, but maybe the benefits outweigh costs. Revenue tax reduces accounting
costs, simplifies models, it's better for small startups etc.

------
tcfunk
> The average UK salary is £26,500 on which employees pay a total of £5,392.80
> in income tax and national insurance contributions.

Whoa, what? That's some hefty tax for the 26k bracket!

~~~
cardinalfang
Half of that is national insurance which is concentrated on £8k - £35k band,
counteracting the progressive income tax bands.

------
DrNuke
The political point here is that big corps are unfairly draining a lot of
money out of the local systems they operate in. This leads to reducing
services locally, starving the unemployed and the poor and straining middle
classes big time. Exhilarating amounts of money are funnelled and stockpiled
under the name of unaccountable entities named Apples, Googles etc. against
many millions poor that wil need basic income to survive sooner than later. Is
this the world we need, really? The principle is simple: local branch entities
pay taxes locally just as any local small business.

------
samfisher83
Instead of corporate tax the employees are being charged individual tax. I
think eventually the government gets the money.

------
Nelkins
Does anybody have any recommendations for decent books or articles on
corporate tax evasion?

------
baxterross
So, Facebook provides a free service to millions of people in the UK, and
people are pissed that Facebook isn't PAYING more for the privilege of giving
them free stuff?

Sounds like a bunch of ungrateful children to me.

------
WeAllDieByBan
Why do people think that taxation follows a simple accounting mechanism of
collect-and-spend? Taxation is collateral for a soverign to get loans and
bonds. Taxes do not pay for anything.

------
jayess
Outstanding. Tax competition is a good thing.

------
3dfan
What is the news here? FB was making a loss last year, so why should they pay
corporation tax?

~~~
exDM69
> FB was making a loss last year

They don't make actual losses - they pay all of their profits as "license
fees" to some offshore entity to get their accounting show no profits. This
probably means Luxemburg or Netherlands where they have a personalized deal
with the tax authorities and the taxation of immaterial property is very low.

In reality they made a shitload of money, and are using creative accounting to
make it look like they made a loss. This is tax evasion, not making a loss.

------
dpatru
In terms of providing social value, Facebook employees far surpass any
government's employees. In just a few years Facebook has revolutionized how
people connect with each other, whereas governments have, in general, barely
been able to maintain the accomplishments of previous generations. This
despite the fact that government generally force people to pay about one fifth
of their labor, whereas Facebook offers its services for free. Governments
should wither and die in favor of more socially beneficial organizations like
Facebook.

~~~
SuddsMcDuff
You're taking a highly subjective view and presenting it as fact. That
Facebook is a "socially beneficial organization" is extremely debatable. I
would argue that Facebook has actually had a detrimental effect on social
cohesion.

~~~
dpatru
Facebook offers free services to ordinary people to help them stay in touch
with their friends. It also offers a paid services to businesses to help them
communicate to actual and potential customers. Anyone who uses Facebook can
stop at any time. People use Facebook by choice.

In contrast, governments are violent organizations specialize in coercion.
Governments extract their revenue by force or threat of force and use their
revenue to fund institutions and projects that people would not pay for
voluntarily. Governments maintain power by direct force (police and military),
by deceit and misinformation (control of the money supply, compulsory
education), by monopolizing necessary institutions and services (dispute
resolution, security), and by appealing to people's greed and envy. It is
nearly impossible to opt out of government services, especially in the sense
of not paying for them (taxes).

------
rmc
> "We have to ensure our taxes are simple to eliminate loopholes, and that
> taxes are low to increase our competitiveness, so that companies choose to
> base themselves here."

Pick one. You can't have both.

------
nr152522
"It means Facebook's UK corporation tax bill was less than the tax the average
UK employee paid on their salary."

"The average UK salary is £26,500 on which employees pay a total of £5,392.80
in income tax and national insurance contributions."

Corporation tax and personal tax are not the same thing so I don't see how
they can be compared. In fact, in terms of taxes paid to HMRC, they would have
_been_ paid more tax overall.

However, considering they made a pre-tax loss, they should have probably
reviewed those payouts of which I assume was shared amongst those on top.

~~~
fooster
If they reduce their profit to zero by paying out to the employees this means
they don't have to pay any corporate tax, and the employee has to pay income
tax. The personal income tax rate is generally higher than corporate, so why
is this a bad thing?

------
gedrap
I don't have a hope that this tax issue will be solved any time soon. There
are hundreds of billions dollars involved globally, and when you are talking
about that much money... It's very hard to do much about it, let's be
realistic.

I quite agree about the attitude expressed here (Let's Just Give Up on Taxing
Big Corporations,
[http://www.bloombergview.com/articles/2015-10-08/multination...](http://www.bloombergview.com/articles/2015-10-08/multinationals-
don-t-pay-taxes-but-citizens-don-t-object) ). It's not fair but there's not
that much that can be done.

~~~
bkor
That would give them a permanent unfair advantage over small and medium sized
companies. In my country such companies employs loads of people.

~~~
gedrap
But they have that advantage already, they can afford to do things as
described in the original link. They employ a bunch of accountants, offshore
experts, etc.

I am not exactly sure if similar means as described in the article I've linked
would change much.

