Facebook to start paying more tax, claims BBC

March 4, 2016 | 14:00

Tags: #diverted-profits #hmrc #ireland #tax #tax-avoidance #tax-evasion #tax-minimisation

Companies: #facebook #google

Facebook has reportedly agreed to modify how it pays tax in the UK, in a move that will see the social networking giant pay millions of pounds more into the UK's coffers every year.

Following a Pyrrhic victory over advertising behemoth Google, which saw the company paying just £130 million in back taxes from the estimated £2 billion it owed and promising to pay a higher tax rate going forward, Her Majesty's Revenue and Customs (HMRC) has turned its eye to Facebook. Like Google, Facebook operates a carousel of geographically-diverse subsidiaries designed to minimise its tax burden: profits made in the UK are routed through the Republic of Ireland, where corporation tax is considerably lower, saving the company considerable money - to the point where, in 2014, it famously paid less than £5,000 in corporation tax to HMRC despite record profits.

According to the BBC, Facebook is being made to report its UK earnings more honestly and pay the full 20 per cent corporation tax rate on any profits it makes from the region. While the company doesn't reveal regional profit breakdowns, this is thought to equate to millions of pounds more in tax payments in the UK. The shift is hardly voluntary, though, but rather is a response to the government's diverted profit tax which charges 25 per cent on any profits shuffled out of the country - a higher rate than simply reporting them honestly and paying corporation tax in the first place.

Neither HMRC nor Facebook have issued a statement on the matter, which the BBC's sources state has been in the pipeline for some time and is neither an official agreement with HMRC nor a response to its agreement with Google.
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