Facebook set to pay more in UK taxes: a sign of change?
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Amid mounting criticism of low taxes paid by American tech firms overseas, Facebook says it will now report most ads sold in the UK in Britain instead of routing them through a subsidiary in Ireland, which has a much lower corporate tax rate.
The move 鈥 which will be put in place in April 鈥 could lead the social network to pay millions more in taxes each year in Britain, , which first reported the change.
The company will pay its first higher tax bill in 2017.
鈥淚n light of changes to tax law in the UK, we felt this change would provide transparency to Facebook's operations in the UK," the company .
That is likely a reference to the UK government鈥檚 that companies found to be 鈥渁rtificially鈥 diverting their profits generated in Britain to other countries would be required to pay corporate taxes at 25 percent. Corporations regularly pay a rate of 20 percent on profits generated in the UK.
The tax increase quickly became known as the 鈥淕oogle tax,鈥 in reference to concerns about the search engine company鈥檚 underpayment of taxes on profits made in Britain.聽 In January, Google agreed to pay 拢130 million in back taxes covering the previous decade.
While the search engine giant has repeatedly said it complies with all tax rules, officials from the company were harshly rebuked by lawmakers in a hearing last month, with Meg Hillier, the chair of Parliament鈥檚 Public Accounts Committee, accusing the Google officials of having 鈥渢in ears.鈥
鈥淥ut there, our constituents are very angry,鈥 she said at the hearing. 鈥淭hey live in a different world, clearly, to the world you live in, if you can鈥檛 even tell us what you are actually paid,鈥 she told Matt Brittin, the head of Google鈥檚 European arm, who had said he could not tell the committee his own salary.
On Friday, Ms. Hillier responded to Facebook鈥檚 move, saying that 鈥渋t shows any large corporation, including Google, has the choice to do the same thing,鈥 according to a tweet by the BBC鈥檚 Kamal Ahmed.
But Facebook sources told the BBC that their tax change is not a reaction to the settlement with Google and has been planned 鈥渇or some time.鈥
In 2014, the revelation that the social network tax in the UK in 2014 sparked an outcry, with observers noting that workers at Facebook鈥檚 UK arm were paid an average of more than 拢210,000, including bonuses.
Facebook has declined to say exactly how much business it does in Britain and is not legally obligated to do so until it reaches 10 percent of its global operations.
Currently, the company employs 850 people in the UK and is building a new London headquarters. Its main European headquarters is located in Ireland, which has become popular with tech firms for its lower corporate tax rate.
Advertising for Facebook, with its decision impacting ads it sells to major businesses such as Tesco, Sainsbury鈥檚, consumer goods firm Unilever and the ad firm WPP, the BBC reports.
Ad sales to smaller businesses that are booked online 鈥 which require limited participation from Facebook staff 鈥 will still be routed through Ireland.
But whether the change 鈥 which means Facebook will report more revenue 鈥 actually results in the company paying more taxes is still to be determined by the UK鈥檚 tax authority, Her Majesty鈥檚 Revenue and Customs.
The company would only pay more taxes if the authority (or Facebook) decides it is earning more profit than Facebook has previously claimed, .
That may set up a political battle, as British lawmakers have repeatedly questioned whether the authority has been too lenient in negotiating with big companies like the American tech firms.
George Osborne, a Conservative and the Chancellor of the Exchequer, had praised the Google deal as after a long-running investigation, while John McDonnell, the Labor Party's shadow chancellor, called it a 鈥渟weetheart deal鈥 for Google, saying the settlement amount was 鈥渞elatively trivial.鈥
A spokesman for the tax authority told Reuters it didn鈥檛 comment on individual taxpayers but 鈥渂ut HMRC ensures that all multinationals pay the tax due under UK law.鈥