Public anger over tax avoidance seems looming on the horizon for Facebook. It had been inviting criticism from campaigners for its tax payments in the country.
According to accounts published by the social networking site on Sunday, it paid £4.2 million in corporate tax for 2015, making the figure nearly 1,000 times more than the £4,327 it paid the previous year. The twist in the tale appeared when Facebook reported a tax credit for the year, amounting to £11.3 million. Although this is all in line with accounting requirements, it led to angry reactions from campaigners. Alex Cobham, director of research at the Tax Justice Network, said,
In practice, Facebook UK appears to have paid nothing in corporate tax to the UK public purse — less, even, than the £4,327 in 2014.
Facebook’s 2015 UK revenues doubled from £105m to £210m, while overall losses increased 44 per cent over the 12-month period, to £41.2m while it made a global profit of $6.19bn (£4.97bn).
Facebook’s tax bill last year invited criticism of the company’s complex structure, after it came to light that it had paid less in corporate taxes than a Briton on average wages had paid in income taxes. The company therefore vowed to provide greater transparency by changing its UK structure for taxes, and in March, said it would begin booking the largest advertising sales made by its UK team in the country, instead of routing the revenues through Ireland, which has a lower rate. The changes, were executed in April, and are expected to result in the company paying millions of pounds more.
However, since the accounts published yesterday cover the 12 months to the end of 2015, any additional taxes resulting from the structural changes will not be observed or examined until next year’s accounts.
Tax authorities across the world have recently stepped up efforts to fight aggressive tax avoidance by US technology companies. The UK government under its new Prime Minister too is shaping up for a crackdown. Just last week, Theresa May indicated that her government would take further action against multinationals shifting profits and would be “coming after” tax-dodging companies and their advisers. In a speech to Conservative party members, May said,
Whoever you are, however rich or powerful, you have a duty to pay your tax.
After disclosing its accounts on Sunday, Facebook issued a statement,
We pay all the taxes that we are required to under UK law. We are proud that in 2015 we have continued to grow our business in the UK and created over 300 new high skilled jobs.
Come next year, it will be revealed once and for all whether any changes have been truly implemented.