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Facebook Government The Almighty Buck United Kingdom

Facebook UK Paid £35m In Staff Bonuses, But Only £4,327 In Corporation Tax (gu.com) 262

New submitter Phil Ronan writes: After getting away with paying £0 corporate tax in 2013, Facebook UK has announced that its corporate tax payment for 2014 (total revenue: £105 million) is going to be £4,327. This is a tiny fraction of the £35 million pounds given away by the company in staff bonuses over the same period. "The share scheme was worth an average of more than £96,000 for each member of staff. Once salaries were taken into account, a British employee of Facebook received more than £210,000 on average. ... A spokesperson for Facebook said: 'We are compliant with UK tax law, and in fact in all countries where we have operations and offices. We continue to grow our business activities in the UK.' She added that all the firm’s employees paid UK income tax on their payouts."
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Facebook UK Paid £35m In Staff Bonuses, But Only £4,327 In Corporation Tax

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  • by Phil Ronan ( 3491801 ) on Monday October 12, 2015 @10:31AM (#50709077)
    They were going to pay £100 million, but the accountant entered it as 10e7...
  • by willworkforbeer ( 924558 ) on Monday October 12, 2015 @10:34AM (#50709119)
    Is the British corporate rate that different from the personal rate? Did the British government not collect the taxes either way, or did I miss something?
    (North American here, not an expert on British tax rates)
    • Re: (Score:2, Interesting)

      by Anonymous Coward

      Is the British corporate rate that different from the personal rate? Did the British government not collect the taxes either way, or did I miss something?

      The main complaint is that multinationals offshore their profits by e.g. licensing key bits of IP from a subsidiary in a tax haven. 'We would have made a profit, but we paid $100 million to use the Facebook logo to Facebook Holdings (Cayman Islands). ' (not an actual quote).

      So the answer is, the US government may collect some of it down the line but not the British government.

    • Transfer pricing (Score:2, Insightful)

      by Anonymous Coward

      FB employs very few people in the UK, what it does is known as transfer pricing.

      It creates an asset that is held by an off shore low tax country, it then licenses that asset from the UK company to remove the tax liability in the UK.

      The assets are typically synthetic, designed exactly for transfer pricing, so FB UK will be paying for the right to the trademark Facebook, and licenses for patents, and so on.

      The EU and US came up with this plan back in the 90's, they were going to be the IP economies, licensing

    • In the UK a corporation takes in revenue - from that revenue, it deducts all necessary outgoings such as operating expenses, wages, investment, acquisitions (asset or otherwise) etc etc. What is left is the profit. Corporation Tax is based on that profit.

      According to the full accounts, Facebook made a loss of £28.4Million in the previous financial year off of a turn over of £104Million (the accounts list "administrative expenses" of £131.5Million on that turn over).

      The bulk of that administrative expense was staff related costs - a wage bill of £40.8Million, and a deferred share based payments charge of £35.5Million, which along with employers contributions totals £86.3Million.

      The figure of £4,327 is based on the loss, as a nominal figure.

      The figure of £35Million is based on share options and grants maturing for staff - they aren't straight bonuses, they have been on the books for a long time.

    • by beelsebob ( 529313 ) on Monday October 12, 2015 @11:14AM (#50709613)

      The point is not that the tax wasn't paid on the money handed to employees, it's that it clearly wasn't paid on something else.

      You don't hand out £35m in bonuses to employees if you only made £15000 profit (what you would approximately need to in order to pay ~£4000 tax). Clearly the company is doing well, and making a large profit, or the management wouldn't feel the need to give everyone bonuses, so why then is the tax bill not higher?

      • You do pay out that £35Million if its been on the books as future liabilities and it matures in the current financial year, so long as your cash flow allows you to.

        The problem here is the confusion that deferred bonuses and share options creates in situations such as these - the options and bonuses were earned in previous years, and matured in these accounts financial years, so it generates an "odd" impression of the current years accounts.

        • by beelsebob ( 529313 ) on Monday October 12, 2015 @11:58AM (#50710191)

          That would be a fair comment if they'd paid much tax over the past 4 years (the typical life span of share vesting schemes in the tech industry), but Facebook paid £0 corporation tax in the UK in 2012, 2013 and 2014.

          • And Facebook has been around for longer than 2012, 2013, 2014 and 2015, so its had time to accrue year on year liabilities like this. Facebook hasn't just taken one single liability, its actually done the intelligent thing and spread the liabilities out across the years so it doesnt get hit with one £300Million bill.

      • by Malc ( 1751 )

        When you make a £28.4MM loss, you would expect heads to roll but instead FB continues to award their staff. The employees have been rewarded for their loyalty with a huge reward as their options/stock awards vest, which is something that FB can't apparently afford to keep paying out in the UK, based on their losses. They're either lying to HMRC or they're lying to their investors!

        • They're either lying to HMRC or they're lying to their investors!

          Neither... FB exists as a company outside of the UK, so you're only looking at a small slice of it...

    • What's going on is that Facebook (and other companies like Google) claim that their revenue occurs in other countries (such as Ireland). Facebook, Google, etc, employ many people with "Sales" titles in the UK. These UK-based employees sell to UK companies, yet these Facebook, Google, etc. claim that the sales were not made in the UK and so the revenue that is a result of the activitites of these UK-based sales people is not included in the profit and loss calculations for Facebook's UK tax accounting.
  • In the US, the total individual income is something like 10.5 billion, while the total income is 12 billion. Corporations don't pay income tax on wages--they don't get $100 million, pay taxes on $100 million, then pay $90 million in salaries, and then you receive your paycheck and pay taxes on that. That $90 million is your income for working as part of the business.

    Facebook paid 35 million pounds out as bonus wages, and paid very little in taxes. Surprise. Facebook is based in the US; how much are th

  • by CQDX ( 2720013 ) on Monday October 12, 2015 @10:41AM (#50709203)

    If not, what's the complaint? I'm sure the UK government got a nice slice of the pie in the form of income taxes on all those highly paid employees.

    • Right. And TFS uses language like, " After getting away with..." to get somebody all spun up.
      Like it was a crime.
      The whole amount of money involved, whether it had stayed in FB's bank account or went into the employees' salaries, was taxed.
    • by AmiMoJo ( 196126 )

      The tax system is broken, that's the problem. Facebook, like most multi-national companies, uses loopholes to avoid paying tax. A loophole is, by definition, an unintended way to get out of paying what the law intended you to pay. So the scandal is really that the tax system is broken, and also that Facebook, like every other big corporation, likes to make massive profits out of our society and then stiff us by subverting the spirit of the law.

      Just being technically not illegal isn't really much of a moral

  • Not a bad thing (Score:5, Interesting)

    by Pike ( 52876 ) on Monday October 12, 2015 @10:44AM (#50709229) Homepage Journal

    This is actually the way I'd like to see all businesses work. Distribute profits among all employees and tax it as individual income. In a time of stagnant wages and rising inequality what about this practice is bad?

    • > Distribute profits among all employees

      It's not "all employees". The largest employee benefits and salary are often grossly higher for the highest level staff than for anyone else, even for entire departments which they control, and the difference has effectively doubled in the USA over the last 35 years: the top 1$ of income earners now gather roughly 20% of all the income, and still have roughly 12% of all the income after taxes. Both are roughly double the 1980 figures.

      • by Pike ( 52876 )

        So what you're saying is...you would be in favor of distributing profits among all employees? Which is what I said also. Yes inequality is a problem that's why I said what I said. I'm befuddled why you would essentially agree with me but phrase it as though you're taking a contrary position.

    • by smithmc ( 451373 ) *
      Yes, this would be a great thing actually. I don't understand what everyone is complaining about. Facebook is being remarkably generous in this situation.
    • This is actually the way I'd like to see all businesses work. Distribute profits among all employees

      I'm sure all businesses will be leaping that the chance to implement this just as soon as the shareholders give it the green light...

      • by Pike ( 52876 )

        Right but so what? I didn't say it was likely to be supported by non-participating shareholders. If we only proposed changes that already had the support of every stakeholder nothing would change, ever.

    • This is actually the way I'd like to see all businesses work. Distribute profits among all employees and tax it as individual income. In a time of stagnant wages and rising inequality what about this practice is bad?

      But that's not what is happening. Facebook's profits are artificially low because Facebook recognizes and reports a lot of its UK revenue in another country (such as Ireland).

      What happens is that Facebook (and Google, etc. ) employ people in the UK with "Sales" in their job titles. These UK

    • by AmiMoJo ( 196126 )

      That's not what they actually did though. The bonuses are just an example of them having money to give out because of their huge revenues. They then moved the rest of their profit offshore, so that they didn't have to pay corporation tax on it.

  • Seems to be a bit of selective clipping in the description, the key part that is missing is that the company was operating at a £28.5m loss and still ended up paying some amount of corporate tax. Not sure what the problem is? Is the company supposed to have done something wrong by paying out a large bonus that will be taxed individually anyways? While there are some interesting tidbits in the article about things like profit deferral, none of that seems relevant to the case at hand, so I'm somewhat at

    • The biggest problem is why Facebook UK made a loss (thus avoiding taxes) -- mostly it was because of the high prices of the letters a, b, c, e, f, k and o which it rents from Facebook US at extortionate rates.

  • by TheSync ( 5291 ) on Monday October 12, 2015 @11:02AM (#50709463) Journal

    UK corporate tax rate (on earnings, not income): 20%

    (Note: US top Federal corporate tax rate is 35%, along with state corporate tax rates as high as 12%).

    UK personal tax rate is 20% up to 42,385 pounds, 40% above that, and 45% above 150,000 pounds.

    So frankly, the UK is receiving more tax money on income paid out as salaries above 43K pounds than if it simply retained earnings.

  • by SensitiveMale ( 155605 ) on Monday October 12, 2015 @11:15AM (#50709623)

    Anyway, the first rule of economics "Companies don't pay taxes. People pay taxes."

    Does anyone know how much they spent as a business expense? That's what accountants are for. Reduce taxes over the year. "Where going to have this much profit this quarter. Rather than pay the tax, find out what equipment we need and spend it there." Not a damn thing wrong with that and every business and every home owner does the same.

  • Who Cares? (Score:5, Insightful)

    by bobbied ( 2522392 ) on Monday October 12, 2015 @11:23AM (#50709725)

    If Facebook (or any other company) paid their LEGAL tax oblation, what's the beef? If they are not cheating and breaking the rules, WHO CARES?

    If a resident of the UK somehow get's the idea that Facebook *should* be paying more, then it's up to you to CHANGE THE LAW to make it fair. You guys have elections, you elect the people who write the laws, go make your case with them and insist they change the law..

    I get so tired of this, "all big corporations are evil" narrative, especially for companies which are FOLLOWING THE LAW. IMHO MOST companies follow the law, both because it's good for business and because folks don't like going to jail. So can we please stop with this narrative? It's not valid.

    • Companies maximise profit, and they influence politicians to get the loopholes they want to avoid paying tax. Your annoyance needs to be focussed on the politicians for doing this, not the companies, I agree. That doesn't mean you should feel good about companies lobbying and then using loopholes to avoid tax.

      You obviously have the option of not using companies that behave in ways that you disapprove of. Don't like companies that don't pay a living wage? Boycott them. Don't like companies that go to ex

      • Most companies act both ethically, morally and legally. When they don't there are criminal and civil ways to change their behavior.

        We need to stop using the default setting that "big companies are out to cheat me" and realize that the vast majority are just out to do business and make some money. There is NOTHING wrong with making money and making lots of money does NOT imply somebody was cheating, yet with today's mindset that's the default setting. OH.... Company X sold BILLIONS of dollars of products

    • The law is like a massive code base. Like all such, it has bugs and loopholes. Sure we fix them as soon as we can (generally, more slowly in massive code bases). But at the same time when we find folks using exploits then we defend in every other way we can. That's what's happening here.

      (plus: Each one of these outraged news stories is part of the PROCESS by which the bugs get fixed in a democratic society).

      Summary: quit complaining about it.

      • I will quit complaining about it when the *subject* says "Law allows Company X to pay only Y in taxes!"

        The way this is presented matters. This "Big Company" = "Bad" + "UNFAIR" equation has got to stop. It's about the LAW, not the company. But the way it's headlined and written it becomes about the company and not the law in this article. This is BAD journalism, which is becoming commonplace and we need to object to it when we see it. (Go read Orwell's '1984' again and see why..)

  • I assume a large chunk of those bonuses are going to normal employees (tech companies often have 10%+ in yearly bonus as a normal thing).

    Those bonuses are taxed. And then they're spent, and thus taxed again.

    I dunno what's the income tax on that side of the world, but I'm going to go on a limb that it's going to be more money than corporate tax.

  • Hate the game, not the player.

Loan-department manager: "There isn't any fine print. At these interest rates, we don't need it."