Over the weekend, Facebook published its accounts showing that its efficient tax structure helped its main U.K. subsidiary generate an £11 million tax credit in 2015. What’s interesting to note is that it came at a time when revenues were rising.
Share incentive scheme raising losses
Affiliates such as the main Irish unit fund Facebook UK Ltd., and in 2015, those affiliates provided over £210 million ($261.14 million) to it, notes Reuters. However, the amount was insufficient to meet costs, and hence, it led the U.K. subsidiary to a huge loss of £52 million. A Facebook spokeswoman said the company paid all the taxes that U.K. law required it to.
“We are proud that in 2015 we have continued to grow our business in the UK and created over 300 new high skilled jobs.”
The charges for share incentive schemes that have not vested as yet, further raised Facebook’s U.K. loss. However, Facebook will not get the benefit of the tax deduction yet, so it might still have to pay tax for 2015, says Reuters.
Each year, the U.S. firm generates hundreds of millions of dollars in revenues from its U.K. clients, but until this year, all the transactions were booked in Ireland, helping it minimize its U.K. tax bill, note analysts.
Facebook U.K. accounts do show true sales
Public anger over corporate tax avoidance spurred U.K. politicians to criticize the tax arrangements of U.S. tech giants, including Facebook, in recent years. Such companies try to benefit from loopholes in U.S. and international tax rules to evade tax payments.
With an aim of targeting tax structures like Facebook, the U.K. government introduced a new tax last year. In March, the social networking giant said it would begin to report some U.K. revenues in Britain from 2016, but the impact that this change will have on its tax bill was not clear, notes Reuters.
If Facebook receives a tax credit of £11 million, it might upset critics as the company might use it to offset tax bills at a later date, notes the BBC. Many believe that Facebook’s U.K. accounts do show the true sales it made in the country as they are actually booked in Ireland. So their real value is never revealed.
Though Facebook’s accounting practices are in line with U.K. laws, many doubt the U.S. firm’s intentions.
On Sunday, the campaign group Tax Justice Network said, “Facebook U.K.’s accounts show specific issues, but point also to the real problem: that major multinational companies appear to be able to pick and choose, unlike the rest of us, where and how much tax they will pay.”