He tries again on Facebook’s accounts

And actually manages to get it right:

So, what can be done? This is an issue that I cannot address in depth in an already wrong blog.

No, really, I haven’t edited that.

And the real stupidity here is that we know exactly what Facebook is doing.

It’s got a bunch of engineers in the UK.

It’s got an advertising sales office in Ireland.

Facebook Ireland sells the ads in the UK (EU Single Market stuff) and chucks enough money into Facebook UK to pay the engineers.

And that’s it.

There’s nothing difficult about this at all.

58 thoughts on “He tries again on Facebook’s accounts”

  1. So Much For Subtlety

    Yep, Ritchie is an idiot yada yada yada.

    The more interesting question is raised by the way TW phrases that. It makes it look like the boss is in Ireland and they just do some technical work in the UK. The Ad men make the money and pay the engineers from Ireland.

    Now reality according to the Accountants is not always the same as reality (or as perhaps Whoopie Goldberg would say, reality reality). The important question is where the headquarters really are. I would hope they are co-located with the engineers, not with the ad men. Facebook might survive and produce something useful if they are.

    Unfortunately I expect that they probably are located in the UK. But only because it means the wives of the senior managers are closer to Harrods. Not because they give a damn about the engineers.

    Sell any Facebook shares you have. After all, whatever else you can say about Walmart, its senior managers are probably really focused on their jobs.

  2. @SMFS

    Nah, as a class, senior managers are like politicians – and the more time they spend dossing and whoring the better.. as it’s less time they’re spending twatting things up where it matters.

  3. He’s wriggling like a weasel caught in a cleft stick crossed with a village idiot on the horns of a dilemma.

    He seems to have realised that if he wants to stick his fat head up above the parapet he can no longer delete all critical comments. Unfortunately, he writes very stupid things and it is easy for commenters to show exactly how stupid.

    What he basically needs is a lobbying job with a charity somewhere, ASAP.

  4. And again I agree with SMFS. Does anyone actually believe the work is being done in Ireland? Maybe it is, but if it is then given the number of companies doing it there must be millions of people working in Dublin.

    I’m afraid Ritchie’s side of this argument has already won the debate. The OECD is implementing country-by-country reporting, and both the OECD and EU are making some noises about stopping profit shifting and taxing things where the real economic activity takes place.

    And from my vantage point, as a seller of my labour in a jurisdiction with swingeingly high, unavoidable, taxes on labour (I can’t do my household bookkeeping in Ireland for some reason, or submit my tax return in Estonia under single market rules, or – not being the chairman of HSBC, route part of my salary through Panama or the Netherlands for “privacy” reasons), it’s really, really hard to see that as a bad thing.

  5. The important question is where the headquarters really are. I would hope they are co-located with the engineers, not with the ad men.

    Oh fuck no! You want the engineering done as far away from HQ as possible. Trust me, I work in an HQ doing engineering, and it’s a nightmare: everybody is focused only on arse-licking their management and furthering their own careers, nobody makes any decisions, and we are forced to attend endless meetings and discussions rammed full of the sort of people who could only survive in an HQ.

  6. And from my vantage point, as a seller of my labour in a jurisdiction with swingeingly high, unavoidable, taxes on labour (I can’t do my household bookkeeping in Ireland for some reason, or submit my tax return in Estonia under single market rules, or – not being the chairman of HSBC, route part of my salary through Panama or the Netherlands for “privacy” reasons), it’s really, really hard to see that as a bad thing.

    So instead of the standard lefty fuckwit response of “fuck it up for everyone”, we should make it possible for private individuals to benefit from Single Market rules.

    It would be a small recompense for putting up with all the rest of the bullshit pumped out by the EU twats.

  7. Most of the UK insurers have (or had) related offshore companies in Ireland or IoM in order to write tax efficient business to HNWs.

    From personal experience, I know they are extremely careful to ensure that only sales are performed in the UK. All management decisions are made (and demonstrably seen to be made) in Dublin/Douglas.

    HMRC are extremely interested in this and regularly check that all is in order, despite Ritchie’s view that they are in the pockets of big business.

  8. (…and I should clarify that the policies are actually “sold” offshore, it’s the sales process that occurs in UK)

  9. Have you lot not noticed the *really* interesting thing about this post? Tim is starting to get the hang of quotations.

  10. “Oh fuck no! You want the engineering done as far away from HQ as possible. Trust me, I work in an HQ doing engineering, and it’s a nightmare: everybody is focused only on arse-licking their management and furthering their own careers, nobody makes any decisions, and we are forced to attend endless meetings and discussions rammed full of the sort of people who could only survive in an HQ.”

    This. Staff Officers in the bunker.

    We have many such people here. Their role appears to be to hold and attend meetings about subjects tangential to what makes the business money.

  11. To be fair to Murphy, it isn’t just him. I bought the Sunday Times (never again) and this was headline news on the front page. The article was no different in tone or innuendo to the crap he vomited into his dictatorphone.

    This is the worrying bit. When what is effectively an Establishment paper doesn’t give a fuck about what a fairly simple Law says (ie you pay CP tax on profits, not turnover), we are in trouble.

  12. @Rob

    And High Rifkind in the times yesterday was screeching on about it, complaining that paying high wages to their staff resulted in Facebook paying less CT.

    The high level of ignorance in the media is astonishing which is why twats like Murphy need slapping down as they reinforce the ignorance by giving it a veneer of authority.

    “Facebook directors eat babies. I know because Professor Richard Murphy said that was no evidence to prove that they didn’t.”

  13. Can anyone explain to me how the government’s proposed “google tax” on “companies that take money out of the UK” is supposed to work in cases like this? FB UK isn’t sending loads of ad money out of the country to FB Ire.

    In fact FB UK is a red herring here as far as I can see and their tax is basically irrelevant. If FB pulled all engineers from the UK and shut FB UK we would still be demanding that FB SOMEWHERE gets UK-taxed bearing in mind that quite substantial amounts of moolah are indeed being generated in the UK.

  14. The location of management is irrelevant, although I agree that keeping them as far away from engineering is crucial. The important question is: who in Facebook makes the money?

    For Facebook: Engineering is a cost center & ad sales is a profit center. Corporation tax should be paid where the profit arises. Therefore it gets paid in Ireland.

  15. The Google tax basically says:

    – You as a group have set things up deliberately so that you’re selling *to* the UK, rather than *in* the UK
    – If you’d set things up differently, so that all your sales to the UK were made in the UK, you’d have extra UK taxable profits of X.
    – So we’ll charge you an amount based on X

    So yes, Facebook UK is irrelevant for the Google tax – that looks at Facebook globally.

  16. @Pellinor

    As a one-man operation who exports services to the US, China, South Africa, India, Thailand, Russia, UAE and a few more, I’m glad none of them take a slice of my pie – the paperwork would be terrifying! I presume the google tax only kicks in at a certain UK turnover/estimated alleged profit. On the face of it, that doesn’t look massively compatible with how the EU works even for large corps (the Irish can’t be happy about the proposal surely).

  17. @Pellinor

    Has anyone asked if it works in reverse? Many companies in the UK have arranged things so that they are selling *to* foreign countries rather than *in* foreign countries.

    Will they get a tax refund from HMRC………..

  18. Murphy has addressed this situation in the case of Rolls-Royce, where he pointed out that as the head office is in the UK, the profits of the entire business rightly belong in the UK regardless of where the sales take place.

    So:
    – Rolls Royce sells to the US: profits taxable in the UK, where the HQ is
    – Facebook sells to the UK: profits taxable in the UK, where the customer is

    I did press him on this at the time, but he wasn’t very forthcoming 🙂

    IIRC, RR’s position was that sales from the UK were taxed here, but where they had a selling entity in a jurisdiction the sales should be booked and taxed in that entity; Murphy dismissed this as a clear attempt to shift profits.

  19. As usual Tim you miss teh point and need to get real.

    Facebook had trunover of 104m in 2014. Any right-thinking member of civil society would see this needs taxing properly. Let’s say at a rate of at least 50%.

    The UK staff employed by Facebook are clearly neoliberals who just want to abuse the system with their excessive bonuses.

    Candidly you should refrain from commenting on isseus that public intellectuals have already dealt with competently.

  20. BiG>

    “And from my vantage point, as a seller of my labour in a jurisdiction with swingeingly high, unavoidable, taxes on labour (I can’t do my household bookkeeping in Ireland for some reason, or submit my tax return in Estonia under single market rules, or – not being the chairman of HSBC, route part of my salary through Panama or the Netherlands for “privacy” reasons), it’s really, really hard to see that as a bad thing.”

    Get a decent accountant, and, crucially, set up in business from the get go with tax minimisation as an objective, and it’s not that hard.

  21. “Get a decent accountant, and, crucially, set up in business from the get go with tax minimisation as an objective, and it’s not that hard”

    Quite so, as all the tax laws that are available to multinational corporations are available to Joe Public if he wishes. Its just that it only becomes worth using all these rules when the money at stake is large enough.

    Everyone can use the same rules that Philip Green and his wife have used. There is no special set of laws for multimillionaires. They use the same ones as the rest of us. Its just that you need excess income over what you need to live on to make it worth your while.

  22. Simple solution: Abolish Corporation Tax in the UK. Then all those companies HQ’d in Ireland or Luxemburg or wherever would move PDQ to the UK thus creating loads of taxpaying jobs, paying loads of business rates, generating loads of profit for their shareholders who would invest in UK centered companies and generally increasing the wealth of us all.

    (And giving the Murph even more to winge about.)

  23. I think Kevin’s proposal is actually politically doable, if it’s done as a temporary trial. Say candidly to the public, “Look, we think this will work, but we understand there’s a lot of quite reasonable scepticism, so we’re going to give it a four-year trial. We’ll all be able to see the results, good and bad — in the national statistics and in our everyday lives. Tell us in four years if you want the trial extended.”

    The usual suspects would of course have conniptions, but I’m convinced the electorate would have some respect for this kind of approach to politics.

  24. S2: sadly no, as it wouldn’t matter if this doubled the overall tax yield and also indirectly cured cancer – there would be NO CORPORATION TAX paid. The curing of cancer would be a cynical neo-liberal ploy to disguise their true intent, which is NOT PAYING CORPORATION TAX.

  25. Pellinor : “Murphy has addressed this situation in the case of Rolls-Royce, where he pointed out that as the head office is in the UK, the profits of the entire business rightly belong in the UK regardless of where the sales take place.”

    This is something I cannot apparently get into lefties’ heads. If we demand of (say) Germany that all tax on transactions in the UK is paid to the UK coffers, Germany will counter-demand that all transactions in Germany by UK companies are paid into German coffers.

    RR is the classic example of this as it makes most of its money servicing engines, doesn’t it ?

    Surely no country is going to agree to a tax treaty which Murphy’s reply suggests – basically wanting to have your cake and eat it.

    Am I missing something ?

  26. If you’re missing something, then so am I 🙂

    I think the best I can say is that Facebook and Rolls-Royce are different businesses, so I wouldn’t expect to have exactly the same broad-brush expectations about where their profits would arise. But I would expect to apply some consistent principles.

    What I try not to think about is the way that small children tend to find all sorts of reasons why it’s their turn to have something. On Monday they have first dibs because they didn’t yesterday, on Tuesday they get first dibs because they always do on Tuesdays, on Wednesday it’s because someone else had a bit more pudding at dinner, on Thursday it’s because their knee hurts… they’re very good at finding reasons why X should be so, but arguments to the contrary are a bit harder for them 😉

  27. Pellinor>

    I’m afraid what you’re both missing is that there is one consistent thread running through everything Ritchie says that ties it all together neatly and logically: he’s using codewords to talk about how the jooz steal all your money.

    This is yet another example of him saying something that makes absolutely no sense under any set of assumptions – unless one assumes malice. He’s so consistent in that practice that we can’t keep hoping it’s incompetence anymore.

  28. Rob is right – Corporation tax is like catnip for Lefties, for some unknown reason. You have to have it even though it leads to bizarre situations such as a UK company making stuff in China and selling it in Spain then working out which government gets which slice of the tax. And all the outrage about Facebook just sounds like the usual Lefty thing…someon’e having fun. How do we stop it?

  29. I think it’s because lefties are convinced that corporations actually have their own money that somehow doesn’t come from people.

    Simple question. Corporation gets a giant crippling tax bill, larger than they can afford. Do they (a) pay it, even though that means going under, or (b) sack some staff and hike their prices up? You’d think the answer was obvious, but no.

  30. S2 I know what you meant and I guess that is what gives it that sweet smell to lefties – both a company paying large amount of corporation tax, which is good, and sacking staff so lefties can pile on a second time about heartless capitalism.

  31. S2

    You ever get the lunch from Brand?

    Tim has been banging on about this for years – makes no odds – In the Left’s eyes FB is one of a number of Magic Money Trees out there – whose sole existence is to provide income for unionised state employees – they serve no other purpose….

  32. ‘Say candidly to the public, “Look, we think this will work, but we understand there’s a lot of quite reasonable scepticism, so we’re going to give it a four-year trial. We’ll all be able to see the results, good and bad — in the national statistics and in our everyday lives. Tell us in four years if you want the trial extended.”

    The usual suspects would of course have conniptions, but I’m convinced the electorate would have some respect for this kind of approach to politics.’

    I think this is absolutely right. People are fed up with politicians lying to them, and especially fed up with politicians claiming to have the answers to stuff that they plainly do not and cannot have.

  33. Another way of looking at it:
    nPower is a UK company that sells electricity to UK residents. All it does in the UK is buy electrons from National Grid and sell them to customers. Its helpdesk is in Bangladesh, so every year it sends just enough money to nPower Bangladesh to pay its helpdesk staff. Therefore, nPower should be paying all its corporation tax in Bangladesh. How DARE they get away with ripping off the Bagladeshi exchequer by paying its corporation tax in the UK? foam drool gibber.

    (Very simplistic, but a first-order analogy)

  34. Bloke in North Dorset

    “And High Rifkind in the times yesterday was screeching on about it, complaining that paying high wages to their staff resulted in Facebook paying less CT.”

    This is more about those nerdy, geeky, guys who everyone laughed at at school now earning more than the uber cool guys who used to do the teasing.

  35. @jgh: not quite though is it? If nPower were using a Tesla power grid to distribute electricity globally, and some of that electricity was being bought by Bangladeshi people, and nPower’s help desk was also located in Bangladesh, then that would be a better analogy. Cos thats the thing – Facebook are ‘in the UK’ in the sense of loads of UK people are using the product, but because of the wonders of the net, physical presence is no longer required to be somewhere.

    The whole internet thing means that its high time we abolished corporation tax and taxed people instead. People have the advantage (from a tax perspective) of only being in one place at one time. If I’m in the UK, I’m not in Ireland. Or the USA. Or wherever there is a RM-like figure frotting himself into a frenzy of tax-inspired ecstasy.

  36. @ jgh
    Actually nPower started life as a generator of electricity with a mixture of oil-, gas- and coal-fired power stations, carved out of the CEGB. It actually *sells* electrons via National Grid. But your claim that it should pay tax in Bangladesh remains valid.

  37. So Much For Subtlety

    Van_Patten – “In the Left’s eyes FB is one of a number of Magic Money Trees out there – whose sole existence is to provide income for unionised state employees – they serve no other purpose….”

    You know, in fairness, it is Facebook. They don’t actually have any other purpose do they? I mean apart from enabling people to stalk their ex-boyfriends and girls to get all their friends to go “Oh. My. God. You look so thin in that photo!”

  38. One of his latest responses when I pointed out there is a difference between I don’t agree with this rule and here is an example why rather than simply saying face books accounts are wrong…….

    “it my job to say when rules are wrong and get them changed”

  39. Hey I’m overjoyed that Soapy Jo seems to have banned me…for pointing out that vague, unsubstantiated suggestions that a company is acting illegally are not exactly ethical.

  40. Actually, now I think about it, the most aggressive tax “avoiders” were probably guys like Hoogstraten the property developer, Ronson, Sugar, Rowland and co. If Murph or Soapy Jo wrote a blogpost about them, their kneecaps would probably have been removed in short order. So they take on the soft targets. Waiting for Jo’s post on Mothercare next.

  41. I think it’s because lefties are convinced that corporations actually have their own money that somehow doesn’t come from people.

    It’s also because they don’t really understand what a business is for and what it does. They don’t realise that the biggest contribution a company makes in a community is providing the service people want. They also don’t realise that the second biggest contribution is employing people. They also don’t realise that large businesses keep many other small businesses afloat in the course of their activities: caterers, restaurants, car rentals, etc. Lefties don’t know any of this. They just see a rich “owner” – complete with top hat and cigar – see he has some money and want it for themselves.

  42. This is more about those nerdy, geeky, guys who everyone laughed at at school now earning more than the uber cool guys who used to do the teasing.

    Not quite: the Lefties now wailing were just as nerdy and just as teased, but not half as clever or self-disciplined.

  43. SMFS,

    > They don’t actually have any other purpose do they? I mean apart from enabling people to stalk their ex-boyfriends and girls to get all their friends to go “Oh. My. God. You look so thin in that photo!”

    I see this criticism a lot, and find it odd. Facebook simply enables conversation. Many conversations are banal, yes — but that phenomenon predates Facebook by aeons. And some conversations are really interesting.

    For those of whose friends are scattered around the globe, it’s a completely excellent service.

  44. “And High Rifkind in the times yesterday was screeching on about it, complaining that paying high wages to their staff resulted in Facebook paying less CT.”

    Won’t those employees have to pay Income Tax and NICs when they convert it to cash ?
    Which is more than the CT rate ?

  45. “Won’t those employees have to pay Income Tax and NICs when they convert it to cash ?
    Which is more than the CT rate ?”

    Yes, but murph is on the record as saying that that is still avoidance, even though more tax is paid.

    They don’t just want tax to be paid, they want it to officially be types of tax they like.

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