Facebook is the latest large American corporation to be facing awkward questions about its UK tax bill. The tech giant paid a mere £4,327 in corporation tax in 2014 – less than the average British worker.
It racked up sales of £105m in the UK last year, but took a £28.5m loss after paying out ‘administrative expenses’ of £131.6m, according to its latest accounts filed with Companies House. Almost two thirds of that (£86.3m) was staff costs, included £35.4m in ‘share based payments’. It's not clear what the rest is.
That means Facebook’s UK-based staff (numbering 362 on average in 2014) took home an average of £210,000 each, £98,000 of which came from the generous share scheme.
The Silicon Valley company is entitled to pay its employees – who of course pay tax themselves – what it likes. And in a market as competitive as tech such generous pay packages may well be necessary to hire and hold onto the best staff. But the fact it paid less tax than the average UK worker, whose income tax and national insurance bill was £5,886 on the median wage of £27,200 in the 2013/14 tax year, does not make for likeable headlines.
Facebook, which almost doubled profits to $2.9bn (£1.9bn) in 2014, is also the latest large American company to pay a suspiciously low tax bill. Hackles were first raised in 2012, when Starbucks was exposed for having paid a mere £8.6m in tax since coming to the UK in 1998.
Now the European Commission is investigating the coffee shop chain’s tax affairs in the Netherlands, Amazon’s in Luxembourg (where hundreds of companies had benefited from specially lowered tax bills) and Apple’s in Ireland. Meanwhile, George Osborne announced a so-called ‘Google Tax’ in his pre-election March Budget, which would attempt to stop companies avoiding UK tax by moving profits elsewhere (for example, through transfer pricing agreements).
Tax is not the only area where US companies and European authorities are facing off either. Last week, the European Court of Justice struck down the so-called ‘safe harbour’ deal, where US companies could move European citizens’ data across the Atlantic.
European governments want the jobs and investment large American companies bring and they, in turn, want access to European markets. But it would help transatlantic relations if Facebook, Apple, Google et al were perceived to behave like good corporate citizens.