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Facebook UK Paid £35m In Staff Bonuses, But Only £4,327 In Corporation Tax (gu.com)
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."
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.
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.
No, you are ignorant.
This isn't a matter of paying bonuses vs. paying corporation tax. This is a matter of accurately reporting revenue in the country where it was really earned. What is happening is that Facebook is reporting that sales made by UK-based sales people to UK-based customers (to send advertisements to UK-based computers) is earned in Ireland.
If the revenue were properly reported and the taxes paid, the bonuses would still be paid, so the income tax to the UK government would be the same.
The real "Libtards" are the Libertarians!
Whoosh..... Try again.
Hah that isn't hex it is scientific notation, but you knew that already didn't you?
Actually it is hex. 10e7 in hex is the same as 4327 in decimal. Even though I usually pick up on stuff like that, I have to admit that I would completely have missed this one, partly because I wasn't even trying think it might make sense in hex.
Sort of, yes.
The thing is, Facebook and other massive transnationals (Google, Apple, etc) stow their IP in a country with very low corporate tax rates (Ireland and Cayman Isl. are common), then that parent company charges huge "management fees" or other fees to use the IP in the target country (UK in this scenario). So if they projected to make an annual profit of £100m in the UK, the Irish entity would charge £100m in fees. Facebook UK now makes no profit, but Facebook Ireland makes an additional £100m. Any additional profits can be handed out as bonuses (if they're going to lose a significant portion of the money anyway, they'd rather give it to employees than the government).
This is all completely legal, and has been the bane of politicians around the world for decades. If there were an easy fix, it would have been done by now.
Of course, that's just the ELI5 version, it all gets much more complicated when used in the real world. See here for more.
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.