Facebook share price: Company’s UK arm accused of tax avoidance

Facebook (NASDAQ:FB) has become the latest tech company to find itself in the tax spotlight after its accounts revealed that it paid no corporation tax in Britain last year.

The social network operator’s accounts for 2012 filed to Companies House yesterday showed that revenue at its UK division grew by 70 percent to a modest £34.6 million, while its pre-tax losses narrowed to £2.4 million from £14 million in 2011.

Facebook UK revealed that it paid no corporation tax after utilising a near-£12 million tax asset racked up largely in share options paid to its staff to offset any payments to the taxman. It had paid £238,317 in tax the previous year.

According to the research company eMarketer, Facebook generated £223 million in revenue from advertising sales in the UK last year — six times higher than reported. But the social networking company recorded most of its UK sales in Ireland in a controversial practice that is legal under the rules of HM Revenue & Customs, but has been branded ‘immoral’ by MPs.

According to previous filings to Companies House, Facebook UK has paid just £1 million in corporation tax since opening its London office in 2007, even though it is estimated to have made over £500 million in sales during that period.

A spokesman for the company defended its accounting practices by saying in a statement yesterday:

“Facebook pays all taxes required by UK law and we comply with tax laws in all countries where we operate. We take our tax obligations seriously, and work closely with national tax authorities around the world to ensure compliance with local law.”

Facebook accused of depriving British taxpayer

Facebook, which has more than one billion followers, including 33 million in the UK, and is valued at £77billion, yesterday came in for a barrage of criticism. MPs accused the social media company of “deliberately manipulating” its accounts – and demanded tougher action on tax avoidance by big multinationals.

Margaret Hodge, chairman of the Public Accounts Committee which has investigated Amazon and Google over tax avoidance, said,

“This is yet another example of what appears to be deliberate manipulation of accounts of economic activity to deprive the British taxpayer of a rightful tax contribution, according to the profits they make in the UK. I am getting fed up of this constant stream of stories and little sign of a challenge from HMRC and a strange silence from Government.”

The UK tax debate has intensified recently with executives from Google, Amazon and Starbucks (Tax Avoidance in the UK – Google, Amazon and Starbucks in the Spotlight) being investigated by Hodge’s committee over similar tax evasion practices.

The Facebook share price plunged 6.68 percent yesterday, closing at $47.14.

As of Tuesday, 08.10, buy Facebook shares at $47.77.
As of Tuesday, 08.10, sell Facebook shares at $47.48.