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Facebook taxes patience of British taxman

Monday, October 10, 2016 7:53
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(Before It's News)

The folks at Facebook UK must be washing their faces with vintage champagne judging by the latest tax returns of the Facebook Inc (NASDAQ:FB).

The social media giant is just one of many tech companies causing outrage at the way it “games” the tax system; other culprits include Apple, Alphabet (Google’s owner) and Amazon.com, while beyond the technology sector coffee shops owner Starbucks also came under fire for its tax policies, resulting in a boycott in the UK that quickly had the company voluntarily paying a bit more tax than it was legally obliged to.

Morally obliged to is another issue altogether.

Facebook’s tax return is likely to reignite the debate over multi-national companies that are plainly making a fistful of money in a country but which, somehow, pay next to no tax or, worse still, contrive to receive a tax rebate.

Accounts filed at the UK’s corporate records repository, Companies House, show that the social media giant coughed up £4.16mln (US$5.2mln or so) in the 2015 fiscal year, which was at least an improvement on 2014 when it paid less than £5,000, thanks to its practice of invoicing UK clients from its Irish office rather than UK.

That attracted the ire of Britain’s law-makers and the company agreed from the start of the 2015 tax year to start invoicing British companies as if the sales had taken place in the UK rather than (the Republic of) Ireland.

As an aside, the Republic of Ireland was recently slapped with an order by the European Commission (EC) to recover €13bn (about US$14.5bn) in unpaid taxes from iPhone maker Apple Inc (NASDAQ:AAPL), as the EC asserted that the republic’s tax deal with the staggeringly profitable Californian company amounted to state aid, which is illegal i nthe European Union.

So, at least Facebook has dodged that fate, but it may still get clobbered after the latest tax filing.

The 2015 records show Facebook’s UK revenues were £210.7mln, from which it made a gross profit of £202mln. Subtract administrative expenses, however, and that turns into an operating loss of £52.4mln.

The number of employees increased to 362 from 282 the previous year, and since then Facebook’s UK payroll has increased to more than 1,000, so at least its employees are making a fair contribution to the nation’s treasury.

Facebook’s response, and that of other companies that also exploit loopholes, has always been that it is not breaking any laws, which is true.

Apple’s Irish experience and the campaign against Starbucks (orchestrated via social media) suggests that doing what is legal rather than what it just and fair may not wash for much longer.

Story by ProactiveInvestors

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