You say tax-dodger, I say free-trader: Facebook faces scrutiny on UK taxes

We may earn a commission from links on this page.
Image for article titled You say tax-dodger, I say free-trader: Facebook faces scrutiny on UK taxes
Image: AP Images / Timur Emek

Facebook is under fire for allegedly dodging UK taxes last year on estimated sales of £175 million ($280 million). Facebook has a UK office, but sales are run through Ireland. Soon after the news emerged, everyone from tax experts to members of parliament had their say:

Richard Murphy of Tax Research UK said:

The UK is being taken for a ride. Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it. The UK is giving the tax break and the Irish get benefit of all the tax on the sales.

John Mann, a Labour member of parliament, who sits on the UK Treasury Committee, said:

 It’s disingenuous and immoral for these hugely profitable companies not to be paying tax in the countries where they are based and make a profit. They benefit enormously from the country’s internet infrastructure but do nothing to fund it. It’s like driving a car with no tax. We would stand for it on our roads so why stand for it on the net?

Amazon, Apple, and Google have all come under fire for similar behavior. (Graphic on their tax avoidance strategies). Amazon’s European headquarters are in Luxembourg, while Apple and Google take advantage of more hospitable tax regimes by routing profits through Ireland. What they’re doing is not illegal.

A spokesman from HM Revenue & Customs said:

We can’t talk about named taxpayers for legal reasons, but it’s important to remember that companies pay corporation tax in the country in which they carry on their business activity which generates profits.

Some argue that these companies are doing exactly what the European Union intended when it set up a Single Market two decades ago to encourage free trade in Europe.

Tim Worstall of the Adam Smith Institute, a think tank in London, said:

This is actually the point of the Single Market. To allow all to trade right across the whole area with the minimum of fuss and or bureaucracy. Facebook selling ads from Eire (or Google, which does the same, or Amazon or Apple selling tunes or e-books from Luxembourg) is not a perversion of the system. It is not even abuse of the system in furtherance of tax avoidance: it is the very point of the system. This is exactly what the European Union desires and intends that companies should do. Have one EU base from which they service the entire EU Single Market. The hint rather is in the name of the project after all.

What’s really at issue is the Single Market itself and whether it’s working. The answer depends on where you are. From a UK standpoint, things could look better.

Robert Oxley, campaign manager of the TaxPayers’ Alliance said:

The solution is to simplify the tax system and to have a tax system that can compete on a global standing. Companies are globalized now and you can’t ignore that.