What an interesting claim

Looking at the worlwide accounts sales are $27,538m and profit before tax $12,518m whilst the tax provision is $2,301m. That means the pre-tax margin is a staggering percentage 45.3% and the tax provision rate is 18.4% on profit.

In the UK in contrast the pre-tax profit rate is 6.9% and the tax provision rate a somewhat low, and unexplained by the tax notes, 4.4%.

It’s really not hard as a result to form the impression from this new data that Facebook is declaring vastly lower profit rates in the UK than it is, overall, worldwide. And candidly, when the worldwide profit margin is 45.3% it is very difficult to think of any commercial logic that might justify that profit differential. I know that it will be claimed to be due to the intellectual property having been developed in the USA. But let’s be candid; IP is worthless without a customer and it is UK customers who create the value added in this country, and not the IP as such.

In that case I am of the opinion that in such an extraordinarily high margin business the only real basis for allocating profit to a country is on the basis of revenues earned there, which are what create the value in the IP.

As to the explanation of the taxes, it’s because of share options to staff. Even the Senior Lecturer should be able to work that out.

The IP argument is wholly ridiculous. Think it through a little. JK Rowling has made a billion or so from the IP of her books. Snippa’s claim is that this IP was created in the countries where she has readers and should be taxed there.

So why in buggery are we charging income tax to JK Rowling?

11 thoughts on “What an interesting claim”

  1. Richard Murphy says:
    October 5 2017 at 9:02 am
    No one is saying this is criminal

    So they aren’t “underpaying tax” then you cunt.

    This is also fun:

    “The result is this UK profit and loss account for Facebook in the UK for 2016, which it has just published at the very last moment”

    Unlike the TRUK accounts which were actually published late.

  2. “But let’s be candid; IP is worthless without a customer”

    So are all goods and services.

    The man is a monumental moron.

  3. Ritchie would be on firmer ground if he merely supported IP staying in the country where it was actually created, and not transferred to e.g. Bermuda, as some tech giants have done. Instead he’s just economically illiterate, as usual.

  4. Two uses of candid in the same paragraph. Thank fvck I’ve never tried to wade through his books. All credit to Van Patten and Murphy’s editors for having the perseverance to do that – I’d have needed to be steaming pissed.

  5. Dio

    I llke Murphy’s new strategy to deal with questions he cannot answer, or which are inconvenient for his bald assertions:

    “I do not have the time”. The last refuge of a scoundrel posing as an expert.

  6. The tax provisions are explained in the tax note.
    There is also the minor point that Facebook UK made a stonking loss in 2015 so tax should only be due on a fraction of the 2016 profit (the cumulative net profit less the amount on which tax has been paid in the past).
    Murphy is lying.

  7. @Diogenes, October 5, 2017 at 9:18 am

    He also refers to his students. Remember that the Vice-Chancellor told me that he didn’t teach?

    So he does

    …As I always tell my students, no data makes sense…

    Send the V-C a followup with screen shot.

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