Facebook Accused Of Tax Evasion In The U.K.

A week after crossing one billion active users, Facebook Inc (NASDAQ:FB) is under fire for allegedly dodging taxes in the United Kingdom in 2011. According to the Guardian, the company’s reported sales figures were much lower than the actual sales. Ironically, an average Facebook staff earned more money than the company paid last year in taxes.

Facebook Accused Of Tax Evasion In The U.K.

In 2011, each of Facebook’s 90 UK staff received an average pay of £275,000, but the company put only £195,890 in Treasury’s pockets. The social media site said its UK revenue was £20.4 million, that is just a small pie of £175 million that analysts consider to be the actual figure.

A possible reason Facebook Inc (NASDAQ:FB) paid such low taxes is that the social media giant has its European headquarters in Ireland which has much lower tax jurisdiction than England. The Guardian said that Facebook UK has an arrangement with the Ireland office that allows the social networking site’s British unit to declare only 11 percent of the total UK sales.

When the Guardian asked whether Facebook Inc (NASDAQ:FB) decided to establish its European headquarter in Ireland to lower the tax bills, a Facebook spokesperson said Ireland was chosen because of its skilled employees. “We have our international headquarters in Ireland that employs hundreds and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe,” said a Facebook spokesperson.

The British unit of Facebook Inc (NASDAQ:FB) reported a net loss of £10.2 million last year, but the company admitted upfront that the loss shows negligible resemblance to how the company is actually trading. “The information does not necessarily present a full account of overall global financial performance so it would be a mistake to draw any conclusions from these filings.”

Facebook recently crossed one billion users, but the rapidly growing userbase hasn’t reflected a similar trend in the company’s share prices that have halved since its IPO in May.

About the Author

Vikas Shukla
Although he has a background in finance and holds an MBA, Vikas Shukla is a technology reporter. He has a strong interest in gadgets, gizmos, and science. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com