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Facebook accused of paying just four per cent tax on £2.4 billion in global profits

Facebook only paid around 4 per cent in corporation tax around the world in 2014, it has been alleged.

An investigation by the Sunday Times claimed that the social network paid a total of $123 million (£86 million) to tax authorities outside the US in 2014, despite reportedly making $3.4 billion (£2.4 billion) in foreign profits in the same year.

The figures, reportedly detailed in US stock market filings, suggest Facebook effectively paid a tax rate of 3.6 per cent globally in 2014 – much lower than the 21 per cent corporation tax rate that large companies have to pay in the UK.

This discovery is sure to add to the controversy over corporate tax avoidance, which was recently sparked after internet giant Google was forced to pay £130 million in back taxes dating back to 2005, in what was labelled a ‘sweetheart deal’ by critics of the settlement.

Shadow Chancellor John McDonnell said the £130 million payment meant that Google had an effective tax rate of three per cent – something he believed would make many taxpayers “angry” when filling in their tax returns, which are due on 31 January.

Despite Chancellor George Osborne insisting that the deal represented a “major success” for Her Majesty’s Revenue and Customs (HMRC), the European Commission has indicated it could open an investigation into whether the settlement amounted to state aid, which could breach EU rules.[related-posts]

A number of huge Silicon Valley firms like Facebook, Google and Amazon have faced criticism in the past over accusations that they use complex arrangements to legally pay low rates of tax on profits generated in the UK.

Facebook’s shares jumped sharply last week, after the company announced it had seen a 52 per cent increase in quarterly revenue, mostly due to higher sales of mobile adverts on the social network.

Facebook co-founder and CEO Mark Zuckerberg has recently spoken about his company’s success, saying in 2015 the Facebook community “continued to grow and our business is thriving.”

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