Is Facebook Shirking on Taxes?
Given all the negative news coming from Facebook since their flotation earlier this year you might be forgiven for thinking that they haven't been making any money this year.
That isn't what some in Britain think however. The Guardian report that Facebook are making plenty of money from their UK operations, but that they're not declaring enough of it to the tax man.
The suggestion is that Facebook have been downplaying their income in order to pay less in tax. In 2011 the company paid just £195,890 to the UK treasury in tax.
Whilst analysts estimate that the social network made £175 million in revenue during 2011, the official figures reported to the government are a meagre £20.4 million.
It is believed that most of the estimated UK revenues will have been booked via their international HQ in Dublin, where lower corporation tax rates will mean they have to hand less of it over to the government.
Richard Murphy, of Tax Research UK, said: "The UK is being taken for a ride. Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it. The UK is giving the tax break and the Irish get benefit of all the tax on the sales."
The process involves the sales being recorded in a low tax nation, and a commission then being awarded for those sales to each country the business operates in.
Facebook have also charged their UK office £15.4 million, which will reduce future tax bills. This charge is related to the awarded of share options to employees in their UK office.
Murphy said: "That appears to be £15.4m to reward £20.4m in sales. That makes no sense. The options must, of course, be based on the value of sales recorded in Ireland but the UK is bearing the cost of the tax relief on paying these options."
Follow Technorati