Along with thousands of others I’m participating in a boycott (is abstention a better word?!) from Facebook today for one day to highlight their UK tax dodging. Facebook earned £175,000,000 in advertising sales in the UK in 2011, they paid just £196,000 in UK tax. That’s just 0.1% of their turnover compared to the corporation tax level of 25% for profits over £300,000.
Shifting Sands
Like hundreds of other companies Facebook spirits its cash away through the shifting sands of tax havens and deceptively complicated book keeping.
When a company like Facebook doesn’t pay a fair rate of tax it means deeper cuts in our schools, libraries and hospitals or that the rest of us have to pay more. Instead Facebook profits go into the pockets of shareholders widening the gap further between the haves and the have nots.
Why boycott?
Switching off Facebook for just one day may seem like a futile gesture, but actually highlighting one company, especially one with a clean image that is so part of our lives serves several useful purposes.
- It shows us that tax avoidance isn’t just the so called ‘bad guys’ like McDonald’s or Exxon Mobile or Nestle. It’s everyone. In fact according to the New Statesman 98 out of 100 companies in the FTSE 100 use tax havens. Tax avoidance by large companies in the UK is endemic and they’ve been allowed to get away with it unnoticed for too long.
- An individual case like Facebook brings home the scale of avoidance. Not just a few percent – or failing to declare an odd job here or there, but millions and millions of pounds. At a time where we’re seeing such cuts to our basic services this has a massive impact.
- Participating in a boycott like this gives politicians something to work with. Gordon Brown said that he would never have been able to get a deal out of world leaders on developing world debt without the pressure from Jubilee 2000. There are signs that the government is beginning to crack down on tax havens, but they are going to face unparalleled lobbying from supremely well funded pressure groups.Very well off turkeys don’t vote for Christmas and they are going to kick up an almighty stink. Politicians wanting to see action need to have every weapon at their disposal. That includes knowing that they are being watched and that there are possible votes from us in pushing through change.
Like?
So change your profile picture or share the logo and lay down your status likes and comments for today. Facebook can manage without you for a day and you might just be part of something that can ensure that companies pay a fair amount of tax to pay for the services we rely on.
Grace + Truth 
I saw this in the news recently but was confused by the reports because Facebook are still not reporting taxable earnings. Companies pay tax on taxable profits (or “income”) not on revenues (or “turnover”) and therefore the numbers and percentages listed above are not an accurate or relevant metric.
But I understand the more general point and better consumer facing companies to impact might be Apple, Starbucks, Amazon or Google – all of whom are notably profitable and are taking advantage of the various European and International tax treaties. Better still though, would be a lobbying campaign against the HMRC to have these treaties overturned or amended (e.g., Netherlands-UK Tax treaty, 2008 and the Dublin Treaty). That way, harm to the employees would be mimimised (thinking of the 3,000 UK Starbucks employees on minimum wage who might be impacted by a coffee boycott, for example…).
But I’m curious, bringing the same principles down to a personal level: should UK citizens not declare Gift Aid payments on their tax returns? This is a legitmate way of reducing personal tax payments and therefore could be considered ‘immoral’ in cheating the government out of revenue?
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Hi Doug,
You’re right that Facebook isn’t reporting taxable earnings yet which is why I wasn’t able to quote the most helpful figures. I tried to make clear in the article which figure was turnover rather than profit.
I also agree that the government through the HMRC and at European level need to do a lot differently, but in terms of initially raising discussion about the issue targeting individual companies is far more effective because it’s easier to relate to.
I’m not convinced about the harm to employees – people are unlikely to drink less coffee – maybe more will go to an independent shop which keeps money in the local economy and creates jobs.
Re: Gift Aid – It’s against the rules to claim more gift aid than you pay in tax and individuals should make sure they don’t do that and we should make sure we give to genuine charities. But the big difference is that the government encourage you to gift aid and it doesn’t end up in your pocket as profit.
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To clarify, the point is that Facebook make a loss at the taxable income level and therefore don’t owe any taxes! So I’m not sure why you have an issue specifically with them.
On Gift Aid, I was trying to draw a parallel with the Corporations to whom your point is applicable, and who are merely taking advantage of existing legitimate tax systems and arrangements to lower their tax burdens. Presumably the argument being made here would / should also apply at the personal level and people should not be legitimately reducing their taxable income – ‘avoiding’ paying government much needed revenue?
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Hi Doug,
They make a loss in the UK because they move their profits into tax haven subsidiaries. This is often done by getting the UK branch to pay for things like intellectual property which are based in the tax havens. See http://tinyurl.com/neftaxhavens .
Working the figures backwards (and I appreciate things are a lot more complicated than this back of an envelope calculation but as a very rough indication) £196000 of 25% corp tax of earnings over £300000 = approximate profits of £1.1 million, which if an accurate reflection of profitability means that they would have a profit margin of just 0.6% of turnover. As a comparison supermarkets with very high overheads (unlike Facebook) often have profit margins of 2-4% which is considered slim.
On gift aid – I appreciate the idea of using a personal example as an illustration, but this seems an unreasonable comparison. If companies were lowering their tax burdens and were being forced to give all the difference to charity that would be an appropriate comparison.
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Actually they made a loss because they had more expenses than revenue due to reinvestment in the business (particularly mobile) and high stock compensation expense. Maybe you can point me to a source specific to Facebook’s use of tax havens for revenue from IP?
But IP and tax havens is a massively complex industry in and of itself. I have worked for a leading FTSE 100 company for many years and regularly work with our tax accountants aand I don’t really get it. If you would like, I could set you up with a meeting with our tax and treasury team in London and you could get to chat more about international money flows, tax havens and the taxation treaties and get an insider’s perspective. Let me know if that would be helpful.
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Hi Doug,
– I should correct myself and say that Facebook divert their UK sales through Ireland (not a tax haven) to avoid UK corporation tax http://tinyurl.com/9oacsnb . This is legal, but they should pay tax in the country where the business came from. However, as the new statesman article above suggests it would be extremely unusual if Facebook Didn’t use tax havens – they’re a standard part of a major corporation’s arsenal to avoid tax. I don’t know if Facebook specifically use transfer pricing around IP – although again it is a very common practice.
– Re: complexity. Some things like tax are inevitability complex, but sometimes complexity can be introduced to deliberately obfuscate and that isn’t acceptable.
– Thanks for keeping me on my toes and yes, thank you, it would be great if you could set up a meeting with your treasury team in London, would really appreciate it. Maybe someone who set up the Facebook switch off campaign could join me?
Thanks
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Thanks for your support Jon, and a big thank you to everybody who took part in Switch-off Saturday. We reached over 50,000 people with a message of support for Fair Taxes. There’s been some promising news on the topic this morning, but more needs to be done – please help us keep up the pressure!
There’s a full report on Switch-off Saturday, and easy ways for you to support the campaign, at http://www.church-poverty.org.uk/news/switchoffsuccess2
Liam Purcell, Church Action on Poverty
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Re: not using facebook for a day – think there needs to be a huge petition for a long time in advance of a boycott. Why not the whole of next Aug with the petition starting now.
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