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?