Why Is Facebook’s U.K. Tax Bill So Small?

Why Is Facebook’s U.K. Tax Bill So Small?

Why Is Facebook’s U.K. Tax Bill So Small?

How much do you earn a year? How much of your money goes to taxes? If you plan right and use the right professional help then no matter how much money you make you can still find ways to save on your tax bill. There is nothing wrong with saving on your taxes as long as you do it legally and lawfully. That is exactly the philosophy that many large global companies based in the United States have when it comes to taxes. Because of the high corporate tax rate here in America, many companies are able to use their foreign subsidiaries or divisions to help reduce their tax bill. In some cases that involves shifting revenues and profits from one location to another. In other cases, it can simply be a matter of profitability.

Facebook Saving A Lot in the U.K.

Companies from Starbucks, to Google and Amazon to Apple have found ways to pay a lot less in taxes in the foreign arms of their companies. Facebook is another big company that has saved millions in taxes overseas. In fact, according to some recent numbers the social media giant pays even less in taxes a year in the United Kingdom than most individuals that are employed in the country. In 2014, according to Quartz, Facebook reportedly paid just $6,600 in corporate taxes in the country. That’s despite the fact that the company counts more than 30 million people who are registered users of the service. Facebook also brings in about $160 million in sales in the U.K. Meanwhile, the average worker in the country pays about $8,300 in taxes every year.

Playing it by the Books

While some might cry foul, the fact is Facebook is doing nothing illegal. According to the company, even though it makes more than $701 million in global profits, it actually doesn’t make any profits in the U.K. Because taxes are paid on a company’s profits and not its revenue, Facebook is completely compliant with the country’s tax law. In fact, a company spokesperson said that Facebook is compliant “in all countries where we have operations and offices.” However, even though Facebook is legally in compliance with U.K. tax law, there are many government officials that are trying to put up a fight against the social media giant, as well as against any other large U.S. companies that are paying an extremely small tax bills. European officials have already taken aim at Amazon and government officials in Ireland have their sites set on Apple.

Will Facebook Be Next?

Despite the tax savings these large companies are enjoying, if government officials have their way it won’t continue. For starters, Facebook is already feeling the heat from European officials for possible user privacy violations and a recent court decision in Europe could affect companies’ ability – like Google and Facebook – to transfer data from Europe to the U.S. This is could be a sign of things to come as government officials in Europe fight for more power against these large U.S. companies saving money in their countries.


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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.


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