Spotlight on Facebook's tax affairs in Ireland and UK
Facebook is the latest firm to come under scrutiny over its tax affairs after reportedly siphoning £440m into an offshore haven to avoid payments in the UK and other overseas markets.
The social networking giant paid £2.9m of corporation tax – including less than £240,000 in Britain – last year despite making more than £800m in overseas profits in 2011, according to The Sunday Times.
It is understood Facebook uses its Irish subsidiary in Dublin, which is the group’s overseas headquarters, to sidestep tax authorities in the UK and other major markets in similar legal tactics used by Google and Apple.
Starbucks announced an unprecedented move earlier this month to calm mounting public anger over its tax avoidance in the UK, agreeing to pay around £10m in British corporation tax in each of the next two years.
The settlement came after it emerged the coffee chain had paid just £8.6m in corporation tax in 14 years of trading in Britain and nothing in the last three years.
A Facebook spokeswoman said: “Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation.”
The group added it chose to base its international HQ in Ireland as it was the “best location to hire staff with the right skills to run a multi-lingual hi-tech operation serving the whole of Europe”.
Facebook is believed to have moved £440m to a separate sister company in Ireland in 2011, which then shuffled the cash into a division in the Cayman Islands – an offshore tax haven.
While it reportedly paid £2.9m in overseas corporation tax, the group makes significant earnings from outside America, with around 44% of revenues coming from overseas markets.
The group has nearly a billion users worldwide.
British Chancellor George Osborne said the government was getting tough on corporate tax avoidance in his Autumn Statement earlier this month.
He said more resources were being put into ensuring multinational companies “pay their proper share of taxes”.
He also confirmed a £154m blitz on tax avoidance and evasion, with HMRC hiring another 2,500 tax inspectors to target high earners who aggressively avoid or evade tax.