Facebook: The antisocial network branded 'disingenuous and immoral'

Company pays only £238,000 in corporation tax on UK earnings of up to £175m

Facebook was accused last night of "disingenuous and immoral" tax avoidance after a new analysis of its UK business suggested the social networking giant paid just £238,000 in corporation tax in Britain last year.

Although industry experts estimate the company made £175m in revenue from its UK businesses last year, Facebook is able to avoid paying millions in corporation tax by diverting most of its sales via Ireland.

Annual accounts published yesterday at Companies House showed Facebook UK Limited declared turnover of £20.4m using the entirely legal scheme. Yet Enders Analysis, an independent research firm, has estimated Facebook's likely UK sales at £175m last year as the world's biggest social networking website has continued to attract advertisers.

Facebook is just one of a number of online giants that divert much of their UK profits through offices in Ireland or parts of Europe with lower corporation tax rates. One analysis earlier this year suggested that the five largest online companies – Apple, Amazon, Google, eBay and Facebook – managed to save as much as £650m in tax through such schemes. Amazon, which launched in the UK in 1998, is the UK's most popular retail website, with more visitors than Argos, Next and Tesco. Last year it had UK sales of £3.2bn in UK profits. But by registering its European headquarters in Luxemburg it has managed to avoid paying vast sums to the Treasury. Despite accountnig for one if four of all books sold in Britain, it paid no UK corporation tax.

Internet giant Google paid just £6m in corporation tax in 2011 on revenues of £395 million, according to its accounts at Companies House. But that was just a fraction of Google's actual UK turnover because filings from its own US parent company show it generated $4.05 billion (£2.53 billion) in Britain last year.

None of these schemes is in any way illegal but they are controversial given Britain's deficit and raise question marks over whether international online retail giants are doing enough to pay something back to the nations they benefit from.

Labour MP John Mann, who sits on the Treasury Committee, criticised the willingness of web based companies to avoid paying UK tax. "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," he said. "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?"

Mr Mann has suggested implementing a "traffic fee" which would charge companies that are predominantly internet based from being able to use and profit from British infrastructure.

"It could be modest," he said. "The British taxpayer is currently spending a fortune on upgrading the countries broadband network, something that these businesses will benefit from enormously. It's only right they should contribute."

Matthew Sinclair, Chief Executive of the TaxPayers' Alliance, said companies were choosing to register abroad because they had more competitive and less complex tax systems. "Too many companies can exploit the loopholes in the current tax system to minimise their bills, others do pay their fair share but the system is so complicated it is hard for the public to see that," he said. "If Britain wants to compete and ensure everyone pays their fair share then we urgently need to reform our taxes."

UK Uncut said the government needed to make sure large internet companies paid bigger tax bills. "David Cameron and George Osborne have the power to stop big companies such as Facebook avoiding paying their fair share," a spokesperson said. "Instead, this government has shown that it is extremely comfortable with the wealthy getting wealthier whilst the dole queues grow."

According to the latest analysis the London branch of Facebook made a pre-tax loss of £13.9 million last year against a £1.1 million profit in 2010 as it spent heavily on wages, even though staff numbers rose only slightly to 90 people.

Facebook UK's staffing costs more than tripled from £7.9 million to £24.8 million — equivalent to £275,000 per head.

Some staff such as London boss Joanna Shields, Facebook's vice-president of Europe, Middle East and Africa, were likely to have earned significantly more.

The staffing costs included a £15 million "share-based payment charge", which is understood to cover employees' income tax and national insurance on shares they received ahead of Facebook's Wall Street stock market flotation in May.

Staff at Facebook's Covent Garden office could receive an even bigger windfall over the next five years as they are in line for 7.3 million shares, potentially worth tens of millions of pounds.

Even though Facebook's share price has fallen sharply since the float on fears that it is struggling to make money from mobile, the world's biggest social networking website is still growing, reaching one billion users last week.

The site has 30 million users in Britain and Enders estimates its UK revenues could hit £240 million in 2012.

Facebook is able to avoid UK corporation tax because it says sales are processed in Dublin where it has a large international office.

Such a move is entirely legal but is controversial, especially because Facebook founder Mark Zuckerberg maintains that his website is not motivated primarily by money.

"Facebook was not originally created to be a company," Zuckerbeg said at the time of the stock market float. "It was built to accomplish a social mission — to make the world more open and connected.

Facebook declined to comment on estimates that it generated £175 million in the UK last year and defended their decision to locate their non-US headquarters in Dublin where they do pay corporation tax.

A spokeswoman said: "As is normal for an organisation operating in dozens of countries around the world, we regularly file reports about local operations. The information does not necessarily present a full account of overall global financial performance so it would be a mistake to draw any conclusions from these filings." She declined to comment on Mr Mann's remarks.

Life and Style
life
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
News
Joan Rivers has reportedly been hospitalised after she stopped breathing during surgery
people81-year-old 'stopped breathing' during vocal chord surgery
Life and Style
Chen Mao recovers in BK Hospital, Seoul
health
PROMOTED VIDEO
Life and Style
One in six drivers cannot identify a single one of the main components found under the bonnet of an average car
motoringOne in six drivers can't carry out basic under-bonnet checks
Environment
environmentCrop pests are 'grave threat to global food security'
News
i100
Voices
Pupils educated at schools like Eton (pictured) are far more likely to succeed in politics and the judiciary, the report found
voices
Arts and Entertainment
Simon Cowell is less than impressed with the Strictly/X Factor scheduling clash
tvSimon Cowell blasts BBC for breaking 'gentlemen's agreement' in scheduling war
Arts and Entertainment
Shady character: Jon Hamm as sports agent JB Bernstein in Million Dollar Arm
filmReview: Jon Hamm finally finds the right role on the big screen in Million Dollar Arm
News
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
people
News
Brad Pitt and Angelina Jolie reportedly married in secret on Saturday
peopleSpokesperson for couple confirms they tied the knot on Saturday after almost a decade together
Sport
footballAnd Liverpool are happy despite drawing European champions
News
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
tv
News
i100
Arts and Entertainment
Diana from the Great British Bake Off 2014
tvProducers confirm contestant left because of illness
Arts and Entertainment
Lisa Kudrow, Courtney Cox and Jennifer Anniston reunite for a mini Friends sketch on Jimmy Kimmel Live
tv
Life and Style
fashion

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Head of Marketing (Online & Offline, Media, Digital, Strategy)

£85000 - £100000 per annum: Ashdown Group: Head of Marketing - Slough, Berkshi...

Database Developer (SSIS, TSQL, Microsoft SQL) London Finance

£35000 - £55000 per annum: Harrington Starr: A Global global asset management ...

Web Developer/UI Developer (HTML5, CSS3,Jquery) London

£55000 - £65000 per annum: Harrington Starr: A Global Financial Service Organi...

JavaScript Developer (C++ / C# / HTML, Java Angular.js) London

£50000 - £60000 per annum: Harrington Starr: A world leading business intellig...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone