Facebook paid just £28m tax after record £1.6bn revenues in UK
Profits on social media app surged by more than 50% to £97m in latest tax year
Facebook’s UK operations paid £28m in corporation tax last year despite achieving a record £1.6bn in British sales.
The social media company’s latest UK accounts show that gross income from advertisers rose almost 30% last year to £1.65bn, and pretax profits surged by more than 50% from £63m to £97m.
Steve Hatch, the Facebook vice-president for Northern Europe, said: “Businesses across the country use our platforms to grow and revenue from customers supported by our UK teams is now recorded here so that any taxable profit is subject to UK corporation tax.”
But John McDonnell MP, Labour’s shadow chancellor, criticised the relatively small amount of corporation tax the US tech giant paid last year.
“How many more examples of large-scale tax avoidance does this government need before it will take action?,” he said. “It’s no wonder people are outraged at the grotesque unfairness of our tax system.”
Earlier this week, the Organisation for Economic and Development (OECD), proposed a global shake-up of taxation rules that allow companies to shift profits to low-tax locations.
The proposals would give governments more power specifically to tax big technology firms such as Apple, Facebook and Google in the countries where they sell products and services.
Companies that do business in more than one country have long been a challenge for tax authorities, because they can structure their business in a way that minimises their tax bills.
The OECD’s proposal includes new rules on where tax should be paid and on the proportion of their profits that should be taxed in each country.
Facebook’s UK operation expanded rapidly last year with staff numbers rising by more than 50%, from 1,290 to 1,965 year on year, with a total staff wages and pension bill of £431m.
The company’s UK office provides marketing services and sales and engineering support to other parts of the company. Facebook, which also owns the hugely popular Instagram and What’sApp social media services, said it spent £356m on research, development and engineering in the UK last year.
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“The UK is now one of Facebook’s most important hubs for global innovation,” said Hatch. “We continue to grow and invest heavily in the UK and by the end of the year we’ll employ 3,000 people here. These high-skilled jobs are not only working on products like WhatsApp and Workplace but also help develop technology to proactively detect and remove malicious content from our platforms.”
Facebook UK said that the net revenues it made from advertisers rose 50% last year to £797m, meaning 12% of its sales were converted to profits.
This falls far short of the company’s overall global performance – last year, Facebook made $25bn (£19.7bn) of profit on total worldwide revenues of $55.8bn – meaning it converted 44% of its sales into profits.
Last month, the online retail giant Amazon was criticised for paying just £14.7m in UK corporation tax last year, despite reporting sales of £2.3bn.
Earlier this month, Netflix UK’s accounts showed that the streaming giant received a €57,000 (£51,000) tax rebate from the UK government last year, despite making an estimated £700m from British subscribers bingeing on fare from The Crown to Stranger Things.
Last year, Google paid £66.8m in UK corporation tax, up from £49.7m, as pretax profits rose from £200m to £246m. Google UK reported £1.4bn in revenues last year, up from £1.2bn. Apple paid £3.8m in tax on £1.2bn in sales last year.
The social media company’s latest UK accounts show that gross income from advertisers rose almost 30% last year to £1.65bn, and pretax profits surged by more than 50% from £63m to £97m.
Steve Hatch, the Facebook vice-president for Northern Europe, said: “Businesses across the country use our platforms to grow and revenue from customers supported by our UK teams is now recorded here so that any taxable profit is subject to UK corporation tax.”
But John McDonnell MP, Labour’s shadow chancellor, criticised the relatively small amount of corporation tax the US tech giant paid last year.
“How many more examples of large-scale tax avoidance does this government need before it will take action?,” he said. “It’s no wonder people are outraged at the grotesque unfairness of our tax system.”
Earlier this week, the Organisation for Economic and Development (OECD), proposed a global shake-up of taxation rules that allow companies to shift profits to low-tax locations.
The proposals would give governments more power specifically to tax big technology firms such as Apple, Facebook and Google in the countries where they sell products and services.
Companies that do business in more than one country have long been a challenge for tax authorities, because they can structure their business in a way that minimises their tax bills.
The OECD’s proposal includes new rules on where tax should be paid and on the proportion of their profits that should be taxed in each country.
Facebook’s UK operation expanded rapidly last year with staff numbers rising by more than 50%, from 1,290 to 1,965 year on year, with a total staff wages and pension bill of £431m.
The company’s UK office provides marketing services and sales and engineering support to other parts of the company. Facebook, which also owns the hugely popular Instagram and What’sApp social media services, said it spent £356m on research, development and engineering in the UK last year.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
“The UK is now one of Facebook’s most important hubs for global innovation,” said Hatch. “We continue to grow and invest heavily in the UK and by the end of the year we’ll employ 3,000 people here. These high-skilled jobs are not only working on products like WhatsApp and Workplace but also help develop technology to proactively detect and remove malicious content from our platforms.”
Facebook UK said that the net revenues it made from advertisers rose 50% last year to £797m, meaning 12% of its sales were converted to profits.
This falls far short of the company’s overall global performance – last year, Facebook made $25bn (£19.7bn) of profit on total worldwide revenues of $55.8bn – meaning it converted 44% of its sales into profits.
Last month, the online retail giant Amazon was criticised for paying just £14.7m in UK corporation tax last year, despite reporting sales of £2.3bn.
Earlier this month, Netflix UK’s accounts showed that the streaming giant received a €57,000 (£51,000) tax rebate from the UK government last year, despite making an estimated £700m from British subscribers bingeing on fare from The Crown to Stranger Things.
Last year, Google paid £66.8m in UK corporation tax, up from £49.7m, as pretax profits rose from £200m to £246m. Google UK reported £1.4bn in revenues last year, up from £1.2bn. Apple paid £3.8m in tax on £1.2bn in sales last year.