Margaret Hodge MP says it is ‘outrageous’ how little tax the company pays in Britain

This article is more than 1 year old

This article is more than 1 year old

Facebook paid £15.8m in tax in the UK last year despite collecting a record £1.3bn in British sales.

The social media giant’s accounts show that while Facebook increased its UK income by more than 50% in 2017, its pre-tax profits increased by only 6% to £62.7m. The Silicon Valley-based company’s UK taxable profits were reduced by a £444m charge for unexplained “administrative expenses”.

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Globally, Facebook made $20bn (£15.3bn) of profit on total sales of $40bn last year, meaning it converted half of its sales into profits. However, in the UK only 5% of sales were converted into UK-taxable profits.

Facebook was able to reduce its £15.8m tax bill further by claiming £8.4m in tax credits from granting its employees shares in the company. That means the net tax it paid was £7.4m – less than 1% of its total sales.

Margaret Hodge, a Labour MP and former chairman of the public accounts committee, said it was “absolutely outrageous that Facebook’s UK tax bill is 0.62% of their revenue here; on an income of £1.2bn they really should be paying much more than £7.4m”.

Facebook, which is run by Mark Zuckerberg, one of the world’s richest people, with a $62bn personal fortune, insisted that it pays all of its taxes due in the UK.

However, it is the latest in a long list of US companies, including Amazon, Apple, Google and Starbucks, to have been accused of artificially reducing their effective UK profits in order to pay less tax here.

Margaret Hodge (@margarethodge) Absolutely outrageous that Facebook's UK tax bill is 0.62% of their revenue here; on an income of £1.2 billion they really should be paying much more than £7.4 million.

Amazon paid only £4.5m in UK tax last year, despite recording British sales of £8.7bn. Google paid £49.3m in UK taxes last year, on UK sales of £5.7bn. Apple UK paid only £10m in tax on British sales of £1.2bn.

The revelation of Facebook’s modest tax bill is likely to reignite debate over how to ensure that US technology companies – which have been blamed for pushing many high street retailers to the brink of collapse – pay a fair amount of tax.

The chancellor, Philip Hammond, has pledged to push ahead with a new “digital services tax” to force the US firms to pay more tax. He said the UK would introduce its own levy if other countries fail to follow through with a globally coordinated tax plan.

Hammond is expected to outline proposals for the new tax during his budget speech on 29 October. The tax is expected to be based on the revenues of big technology firms rather than their profits, in order to stop companies routeing profits through other countries or paying “royalty” payments to head offices.

“Global internet giants must contribute to funding public services,” Hammond said during his speech at the Conservative party conference. “The best way to tax international companies is through international agreements but the time for talking is coming to an end and the stalling has to stop. If we cannot reach agreement, the UK will go it alone with a digital services tax of its own.”

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Facebook’s head of northern Europe, Steve Hatch, said: “The UK is home to our largest engineering base outside the US and we continue to invest heavily here.

“By the end of 2018 we will employ 2,300 people in the UK and we are doubling our office space in London’s King’s Cross, with capacity for more than 6,000 workstations by 2022.

“We have also changed the way we report tax so that revenue from customers supported by our UK teams is recorded in the UK and any taxable profit is subject to UK corporation tax.”