As is well known, a large number of American technology companies avoid taxation in European countries by transferring income to Ireland. However, data recently disclosed by senior members of the British Parliament still came as a shock to outsiders: last year, Facebook earned approximately $360 million in online advertising revenue in the UK, but the company paid not a penny in taxes.
Margaret Hodge, chair of the Public Accounts Committee of the British Parliament, stated that in the face of tax avoidance by companies like Facebook, all British taxpayers are effectively deprived of a fair source of taxation.
The latest statistics show that last year, Facebook's tax payment in the UK was zero. It is estimated that its advertising revenue in the UK amounted to about £223 million (approximately $360 million). It is reported that in 2011, Facebook paid £238,000 in taxes in the UK, but in 2012 it paid nothing. Meanwhile, between 2011 and 2012, Facebook’s revenue in the UK increased by seventy percent.
According to market research firm eMarketer's forecast, Facebook and Google together captured half of the UK's online advertising market. Although Google holds a larger share than Facebook, Facebook’s share has grown significantly. This year, Facebook’s advertising revenue in the UK may exceed £300 million (about $500 million).
However, Facebook’s impressive revenue figures have not translated into pleasing numbers for the UK government in terms of tax payments. Like Google and Apple, Facebook has transferred almost all of its UK revenue to Ireland.
Hodge expressed that she is tired of the tax avoidance practices of American tech companies, but she does not understand why the British government has remained silent so far.
Statistics show that last year, the revenue Facebook recorded as being generated in the UK was only £35 million, a significant gap from the actual revenue it obtained.
Currently, the tax avoidance practices of American tech companies in Europe have caused dissatisfaction in many countries. France is pushing the EU to implement a new corporate income tax system, which would require companies such as Google, Apple, and Facebook to pay taxes where their users reside (i.e., where the income originates), rather than in the country where the subsidiary collecting the fees is located (especially in Ireland, a tax haven).
Towards the end of October, EU leaders will hold a summit, during which French Minister of Digital Economy Fleur Pellerin is expected to push for changes in corporate tax laws. EU Digital Commissioner Neelie Kroes will also attend the summit.
EU countries believe that technology companies should pay taxes where the revenue is earned, not in the country where the subsidiary receiving the payments is located (especially in tax havens like Ireland).
In fact, combating the tax avoidance of tech companies is no longer just an EU or European stance, but a consensus among Western countries. The US government is dissatisfied with tech companies keeping huge profits overseas for long periods (transferring them back home would require paying substantial taxes), and the OECD has already formulated an action plan to jointly combat the tax avoidance practices of companies like Apple.