Facebook paid £4.16 million ($5.16 million) in UK corporation tax last year, the company revealed on Sunday, a huge increase on the paltry £4,327 (around $5,367 at current exchange rates) it paid the year before. The company’s accounts show a turnover of £210 million, and a taxable profit of £20 million, on which it paid standard UK corporation tax rate.
While technically compliant with UK tax laws, Facebook’s previous payments drew criticism from campaigners and politicians, who complained that the billion-dollar company was shirking its moral responsibility to pay tax in countries that it did business in. The criticism prompted Facebook to overhaul its UK tax structure, changing its policy so it counted UK ad sales as taking place the UK, rather than in Ireland — a tax loophole that had allowed to to pay minimal levels of tax on billions of dollars in profits.
Facebook’s 2014 tax payments drew criticism from politicians
That new structure means the amount of tax Facebook pays in the UK is likely to increase in 2016 and onwards. In an internal memo, the company said that the new structure would “provide transparency,” was “easier to understand,” and “clearly recognises the value our UK organisation adds to our sales through our highly skilled and growing UK sales team.” But the decision to change likely wasn’t entirely altruistic. The UK’s so-called “Google tax,” brought in to stop companies like Google and Facebook from evading tax payments in the country, would charge companies at a rate of 25 percent — higher than corporation tax — on any income discovered to have been inappropriately diverted out of the country.
The British government has tried to crack down on companies using creative accounting to evade tax payments. In January, it ordered Google to pay £130 million in back taxes, and the new rules have forced companies like Amazon to start booking sales in the UK to make them taxable. In addition to these new policies, Facebook’s inflated 2015 amount will go some way to counter criticism aimed at the company for its tiny 2014 tax contribution, but it should still be noted that as Facebook grew its operations in the UK, it also earned an £11 million tax credit that may help it duck hefty bills in the future.