Wonder how long this will stay up at the Guardian?
” In the same period, however, the social media giant Facebook paid just £4,327 in corporation tax to the exchequer, despite having a global market value in excess of $300bn, despite paying its UK staff an average of £210,000 a year and despite, by some estimates, generating up to a tenth of its income in this country and making £1bn profit in the UK every three months. “
You’re getting your information from idiots.
Stock market value is not correlated with profit being made in the UK. for example, Amazon is worth hundreds of billions and yet rarely makes a profit larger than a rounding error. Uber loses billions each year and yet is worth $60 billion. Capital value is something different from annual profit.
If the staff are being paid £210,000 each a year then that’s some £110,000 in tax from each and every one of them (including employers’ NI, which must indeed be included). That’s rather larger than the tax take if the company paid them less, made a larger profit and then paid corporation tax.
” making £1bn profit in the UK every three months.”
The company made just shy of $4 billion globally in 2015. That’s rather less than the £4 billion you are claiming just from the UK.
You’re also claiming that Facebook gets near 10% of its revenue from the UK (we know it cannot be more because that must be detailed in their US accounts). Total revenue was $18 billion or just under for 2015. 10% of that is $1.8 billion, or around and about £1.2 billion.
For the year. And it would be entirely wondrous for anyone to be making £4 billion profit on £1.2 billion turnover.
Perhaps your economic leaders should be written by someone who can count rather than Mr. Chakrabortty?
“The company announced that, from April, it will route its major face-to-face advertising deals through the UK tax system, instead of through Ireland, where the company is based for tax purposes. This is likely to have a significant effect on Facebook’s UK tax bill, since corporation tax of 20% on the profits from those deals can be expected to raise millions of pounds. Online advertising – which may be around half of the business – remains unaffected, however, even when it is paid for by British taxpayers and companies, and will still be treated as Ireland-based. Since nothing else about the company’s business has changed, this suggests that the UK tax collectors HMRC have failed to secure a fair return for the taxpayer from Facebook and similar multinationals in the past – as the 2014 returns imply – as well as failing to nail the online side of the business. Why can the new arrangements not apply to 2015-16?”
The international tax system attempts to tax profits where the economic activity takes place. Not where the sales take place, where the activity takes place. Those large customers will in the future be dealt with by UK salesmen, employed in the UK. This creates that permanent establishment which brings that activity into the UK tax net. There’s nothing odd or surprising about this, this has been the basis of the system since the 1920s when the League of Nations drew up the basic tax treaties.
Those sales being handled in Ireland are not part of the UK tax system: both the double taxation treaties and EU law say they are not.
Both HMRC and Facebook are simply applying the law as it is. and we’d not want either of them to be doing anything different of course.
And a little bonus point for you. Now that those sales are being booked in the UK there is still some significant part of that economic activity which is taking place outside the UK. Facebook wasn’t written in the UK, is not updated here either. So, some part of the economic activity is taking place in California, where that work is done. And that same international tax system which tries to tax where the economic activity is taking place means that Facebook UK must (yes, must) pay a royalty for that economic value.
Thus I predict you’ll all be up in arms sometime in 2018 when we see the 2017 accounts showing that royalty payment being made.
Gold CD up above has the correct answer. Forget taxing the companies, just tax the shareholders.