Facebook Not Into Sharing When it Comes to Tax

October 13, 2015 by

Comments Off on Facebook Not Into Sharing When it Comes to Tax

Multinational corporations like Starbucks, Google, Apple, Amazon and Facebook are coming under increasing pressure globally to pay their fair share of tax in the various local markets where they operate and generate massive profits.

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The pressure is likely to increase with the revelation that last year Facebook generated £105m in revenue in the UK, but only paid £4,327 in corporate tax. This was achieved by Facebook following the standard multinational practice of shifting profits to offshore jurisdictions with low tax rates (something which, whilst highly debatable from an ethical perspective, is currently legal).

This is likely to change in the near future with new legislation called BEPS rules being enacted by the OECD. These are aimed at cracking down on “base erosion and profit-shifting” practices used by many global firms to minimise their tax liabilities by recording profits in low-tax jurisdictions. The UK has also introduced a diverted profits tax, known as the “Google tax”, aimed at preventing hi-tech international firms from minimising their tax liabilities in the UK.

Whilst Facebook paid minimal corporate tax in the UK, it’s likely their staff paid a big chunk in income tax.  Facebook paid out an astounding £35m in staff bonuses last year – meaning their 362 employees in UK on average each received more than £210,000 in salary and bonus payments.

Why should you care?

The situation of multinationals paying minimal tax earned on massive revenues generated locally applies here in NZ too. Checking the NZ Companies Office website readily reveals how little tax gets paid locally.

Obviously none of us wants to pay a single cent more tax than we’re required to pay. However it’s frustrating to see big players not paying anything like their fair share. The reality is that the taxes the big boys don’t pay ultimately have to be covered by the rest of us. Good to see Australia is taking a similar stance to the UK and shutting down some of the tax avoidance loopholes.


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