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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."
They were going to pay £100 million, but the accountant entered it as 10e7...
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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)
Pretending this is my office full of bitter coworkers..
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.
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?
Then the salaries of the employees are taxed - taken from the already taxed profits the corporation made.
Um. No.
Profit is what's left when every expense has been subtracted. If you don't have anything left after paying your employees, you made no profit and don't have to pay tax for it.
Unless it's really different in the UK; which I doubt.
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.
Absolutely! Governments don't ever do anything for me, whereas corporations bend over backwards to keep me happy, I'd much rather they got my dollars.
P.S. Nice to see Ron Swanson is on Slashdot.
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.
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?
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.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
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.