How Facebook dodged its tax bill – and didn’t break the law
Facebook paid no corporation tax last year
But it’s a slap in the face for all the tech startups who have paid their tax bills. Why should Silicon Valley companies be exempt from the tax bills payable by those on Silicon Roundabout?
How is Facebook not paying any corporation tax?
Contrary to popular myth, companies are not under a legal obligation to avoid tax so as to “maximise profits” for shareholders – something that tech startups can consider as they grow.
Facebook is refusing to pay tax because it is perfectly legal and optional for it to do so. It has said so itself:
“Facebook pays all taxes required by UK law and we comply with tax laws in all countries where we operate and have employees and offices. We take our tax obligations seriously, and work closely with national tax authorities around the world to ensure compliance with local law.”
The company probably is paying every penny it is legally obliged to pay – as the law stands. It probably is working extremely closely with national tax authorities to ensure compliance with local law – as local law stands.
Local, English law doesn’t prohibit Facebook from processing its estimated £223m advertising revenue through Ireland. Likewise, local, English law doesn’t prohibit an ordinary person to walk past and refuse to call an ambulance for a child who has been knocked over.
Facebook’s news didn’t go down well
Legality doesn’t automatically equate to morality. That’s why Tech City News followers have responded angrily to the news.
Another reason to not have a Facebook account: http://t.co/yl7UYW4tkO
— Mitch Sullivan (@mitchsullivan) October 9, 2013
— Snowripper1106 (@Snowripper1106) October 9, 2013
— Asad Khan (@AsadA_Khan) October 9, 2013
Fiona Twycross, Economy Spokesperson for the Labour Party on the London Assembly told Tech City News:
While it would be nice for these companies to pay the amount of tax that we expect from them voluntarily, ultimately it is the state’s duty to ensure that this happens.
The way forward: a change of law…
The costs involved in setting up a complicated legal structure to avoid taxes are out of reach for many startups.
This uneven playing field means many startups could be unable to compete with giants of the tech world like Amazon and Google.
The Fair Tax campaign have also proposed solutions. These include requiring companies to be transparent about their trading names, and an explanation of why they use tax havens.
Companies would be obliged to state which subsidiaries they use to operate and publish their accounts.
The most effective – but most difficult – solution would be international cooperation to tax a company’s profits proportionately in the countries in which it operates.
…and of attitude
Yet simply changing the law isn’t enough. So long as companies want to avoid tax, new methods will be pursued to avoid new laws.
Instead, business culture needs to include an acceptance of paying tax as a social obligation.
Facebook serves an economic purpose: London-based Tech startups like Glow use Facebook as a platform. And it also provides benefits to the community, allowing friends and family to interact worldwide.
These purposes need to be manifested by more than the sharing of drunken photos with long-lost school friends. They require the pooling of a certain proportion of everyone’s financial resources. Multinationals can afford to pool more than startups.
No Silicon Valley company should avoid the tax bills payable by those on Silicon Roundabout.
Liam Finn is Editor of The Proper News