Facebook under fire over £34m UK tax bill which ‘beggars belief’

Credit: DENIS CHARLET/AFP

Facebook has been told to "pay its fair share" to British coffers, after its latest accounts showed only a slight uptick in its tax bill despite profits surging by more than a quarter. 

The social network’s filings revealed its corporation tax increased to £40m from £30.4m a year earlier, meaning, including deductions for employee share awards, it paid £33.5m to HMRC.

However, after further adjustments for deferred tax credits, which it expects to receive in future years, Facebook’s total income tax expense came in at £28.6m for 2019, only slightly higher than the £28.5m logged for the prior year. 

This comes even though operating profits spiked to £122m from £97m the prior year. The company logged £2.2bn in gross revenue from advertisers over the year, resulting in ‘recognised revenue’ of £1.07bn, up from £797m a year earlier.  

Critics blasted the tech company over the filings, with campaigner Margaret Hodge, a Labour MP and former chairman of the Public Accounts Committee who now chairs a Parliamentary group on responsible taxation, saying the tax figure "beggars belief".

"While other companies have struggled during the pandemic Big Tech has thrived as people spend more and more time online. Facebook and the rest of the tech giants must do their moral duty and pay their fair share."

The low level of profit recorded by the major tech firms in the UK, and so lower levels of tax, has been a bone of contention for campaigners for years, who argue that Silicon Valley giants use lawful financial engineering techniques to export profits overseas. 

Steve Hatch, Facebook’s vice president for Northern Europe, said: "We continue to grow and invest heavily in the UK and we now employ more than 4,000 people here. Businesses across the country use our platforms to grow and revenue from customers supported by our UK teams is now recorded here so that taxable profit is subject to UK corporation tax."

The company said that it understood there was "frustration about how tech companies are taxed and we support the OECD process which is looking at new international tax rules". 

"While our effective tax rate globally over the last five years has been around 20pc, under current rules we pay the vast majority of the tax we owe in the US. A new framework could mean we have to pay more tax and pay it in different places."

His comments follow a move by the UK to introduce a digital services tax earlier this year, geared to claw back more tax revenue.

Many of the companies affected by the new tax, however, ultimately decided to pass it on to their customers. Google, for example, chose to charge advertisers an extra 2pc from last month to account for the 2pc tax. 

Facebook, on the other hand, broke ranks with the other tech giants, and said it would not be passing on the charge.