Facebook bows to pressure over UK tax affairs

Facebook is to cease routing sales from major UK customers through Ireland in a concession likely to result in a large increase in the amount of tax it pays in Britain.

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The move comes as tax authorities worldwide are trying to counter multinationals' use of complex, international tax arrangements to minimise their liabilities in host countries.There has been growing criticism in Britain over the likes of Facebook, Google and Amazon achieving huge sales but paying virtually no UK tax.Facebook said in a statement on Friday, "On Monday we will start notifying large UK customers that from the start of April they will receive invoices from Facebook UK and not Facebook Ireland. What this means in practice is that UK sales made directly by our UK team will be booked in the UK, not Ireland. Facebook UK will then record the revenue from these sales."In light of changes to tax law in the UK, we felt this change would provide transparency to Facebook's operations in the UK. The new structure is easier to understand and clearly recognises the value our UK organisation adds to our sales through our highly skilled and growing UK sales team."The company, which employs about 850 in Britain – one of its biggest markets outside the US – paid only £4,327 in corporation tax in the UK in 2014, a year in which it recorded a pre-tax loss of £28.5 million in Britain while paying its staff £35.4 million in share bonuses.Under the new arrangement, Facebook's international headquarters will remain in Dublin and smaller advertising sales requiring little or not intervention by staff in Britain, will still be routed through there. The majority of advertising from major UK firms, however, will now be taxed in Britain.Kamal Ahmed, the BBC's economics editor who broke the story, said, "My sources tell me that Facebook moved after coming under increasing global pressure on its tax affairs and as a reaction to changing tax rules."Globally, the company makes more than £1 billion of profit every three months. It does not reveal figures for how much business it does in the UK."The government's new diverted profits tax was also likely to have a punitive effect on the business in Britain. That tax is set at 25 per cent, higher than the corporation tax rate (of 20 per cent), and is aimed at companies which use 'contrived' structures to move profits out of the country."A spokesman for HMRC, the UK tax authority, said, "We do not comment on individual taxpayers. But HMRC ensures that all multinationals pay the tax due under UK law and we do not settle for a penny less."We will closely examine any business's structure on behalf of the British public to make absolutely sure they pay all the tax due to the UK and the new diverted profits tax will ensure the UK gets its fair share of tax from a multinational's profits by making them restructure to stop shifting profits overseas."However, Baroness Kramer, the Liberal Democrat economics spokeswoman, said, "Facebook's decision shows once again that our corporation tax system is fundamentally broken. Whether a company pays its fair share of tax on UK profits cannot be left up to whether they are feeling charitable or not."We need a fundamental rethink of this discredited system, yet George Osborne continues to do nothing but boast about sweetheart deals with major companies that are not available to ordinary British businesses and taxpayers."Facebook's advertising sales in the UK were around £800 million in 2015, according to estimates from eMarketer, while revenue from payments and other services brought the total to £846 million.

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