Facebook has become the latest multinational to come under the spotlight for its tax affairs after figures revealed it paid just 2.9 million pound in tax on profits of more than 800 million pound.
Filings for Facebook Ireland, through which all of the social network’s profits outside the U.S. are channelled, show it paid the Irish tax authority 3.2 million euro last year. Facebook is structured so that companies buying advertisements on the website in the U.K., or anywhere outside of the U.S., have to pay Facebook Ireland.
This allowed Facebook Ireland to make gross 2011 profits of 840 million pound — or 3.1m pound per each of its 287 staff. Despite the high gross profit, Facebook Ireland was able to cut its tax bill to just 3.2 million euro by using an accounting technique called the ‘Double Irish’.
The manoeuvre allows multinationals to move large amounts of money to other subsidiaries in the form of royalty payments. Facebook moved nearly 750 million pound to the Cayman Islands and its Californian parent in licensing and royalty payments.
After the transfers, Facebook Ireland reported a 15 million pound annual loss, despite it accounting for 44 per cent of the social network’s $3.15 billion revenues.
Last year Facebook paid just 238,000 poind in U.K. corporation tax — less than the average pay and bonus of its U.K.-based staff. It is estimated U.K. revenues amounted to 175 million pound last year. — © Guardian Newspapers Limited, 2012