Corporation Tax in the Public’s Face Again

There was a joke going round some time ago that MySpace were going to merge with Facebook and create MyFace. The idea being that you could ask girls “are you on MyFace? Would you like to be on MyFace?” You can’t beat innuendo.

MySpace has since died a death in the big scheme of things, along with some other former high flyers. What happened to Friends Reunited? I guess everyone met their old school sweethearts, and went to a school reunion and then got on with their lives so they stopped paying £5 per annum or whatever it was.

Facebook is in the news again. They haven’t installed the ‘dislike’ button yet, presumably because they had yet to file their UK tax return and pay £4k-odd in CT. At the risk of repeating myself, their tax bill shows good housekeeping. They’ve satisfied their obligation to shareholders by minimising their outgoings, and in turn their accountants have satisfied their professional obligation to their client, in this case Facebook, by mitigating their tax bill through legal means – means which one can only assume were intentionally left open by government to be exploited. Either that or the government did a really bad job. Either way, all correspondence and complaints to the Chancellor of the Exchequer please.

Facebook did pay their UK employees a sizeable amount in bonuses which actually increased the revenue received on that amount through income tax from those employees to the Exchequer. This is actually more than if they’d simply paid CT on it, so in fact they should be getting a ‘Like’ for that from their detractors.

The question is does paying small amounts of CT result in a clear competitive advantage in their immediate sector? Or are they actually robbing Peter to pay Paul because they’ve already screwed up their particular ‘going concern’?

Starbucks is a famous for having excellent tax planning too and their coffee shop sector is, I would say, much more defined and easily comparable. Caffé Nero Ltd was taken back into private ownership in 2007. From the information I found online they had a negative tax liability last reporting period. Their post-tax profit was £23.5m. Costa is owned by Whitbread so that’s not so transparent, although they have more outlets than any other brand (probably because they’re in so many pubs). Coffee Republic plc went into receivership in 2009 and is now Coffee Republic Trading Ltd which offers various kinds of franchises. It’s hard to know how the coffee shops themselves do, but the private company has few employees and net liabilities of over £600k as at the last report and accounts. Franchise schemes are in the end pyramid schemes of a sort, so perhaps they have to keep growing at any cost too. I’m not convinced about this coffee business at all. Perhaps Starbucks does have to massage the figures to stay in business.

What about Facebook then? They’re in internet advertising, since all their revenue comes from it. I can’t see they’re really completely avoiding tax on any global scale. They may not have paid much for their UK operation (the office rent in Euston must be quite prohibitive to start with). The parent

company is registered in Delaware, presumably for tax reasons, but that still didn’t stop them paying almost $2bn in CT in the US. The previous year was $1.25bn. In fact, in the last five years of tax payments the smallest annual bill has been $402m. I don’t remember seeing the meme for that on Facebook. Maybe the Facebook HQ should take a leaf out of the online poker sites and have some in-house players directing the narrative and posting pro-Facebook propaganda. Facebook: UK CT bill £4,327 US CT bill just $1,970… million.