It has just come to light that Facebook paid just under five thousand pounds worth of UK corporation tax last year because times are so hard -- so hard, in fact, that it dished out thirty-five million pounds in bonuses to staff. That's great news for employees, pretty awful news if you're the tax man. Despite making a worldwide profit of $2.9bn, the social media giant made a loss in the UK. It makes one wonder, then, why any tax would have been due in the first place, even if it was a tiny sum that is less than the average Briton will have contributed via their pay slips over the past year. It also begs the question of why British staff paid £35m when the company had not made a profit. They must have a very odd bonus strategy at Facebook. Lose money this year and we'll dish out £35m worth of bonuses?
To be fair to Facebook, this would have almost certainly resulted in several millions of pounds worth of income tax being paid on the annual windfall -- unless, of course, staff have taken a leaf out of their employer's book and managed to find a way to hide away cash so it's taxed at negligible rates away from the country where it was generated.
That's what makes all of this so unfair. The American tech giants can dominate the EU's retail and media scenes, safe in the knowledge that they can hide money away -- quite legally -- in a low-taxation havens. It means they can go to market with a massive advantage of not having to pay their way, effectively giving them the power to discount at rates local companies paying their tax obligations cannot.
So, American tech giants -- be warned. You're currently shrugging and wondering why the EU is picking on you after all the good you do, all those jobs, all those opportunities, all those investments in start-ups. The thing is, though, I blogged fairly recently about how -- if you chat to people involved in the European Parliament in Brussels -- there is a very new feeling following the most recent elections. Those who tried to play nicely with the American tech giants are on their way out, and those who want to see the EU stand up for itself are in the ascendancy.
The EU is famously disjointed when it comes to copyright law, and has evidently failed around corporate taxation if a company like Facebook can claim to have made a loss and so has a tax bill comparable to the average British worker.
That's why the attack is coming through privacy and competition law. Google will tell you all about the latter hanging over it, while all tech giants will feel the sting of having to deal with EU data as separate from American information which needs to be kept within the EU for processing.
When an American tech giant such as Facebook takes such liberties as giving the Treasury less than £100 per week in tax, it can come as very little surprise that another part of the political machine rises up to get redress.
The more the likes of Facebook and Google claim to make virtually no taxable profits, the more the EU is going to turns the screws on privacy and anti-competition laws. It's a very simple premise. Take advantage of the system in one area and the politicians will hit them hard in another -- and they have nobody to blame but themselves. The European Parliament has talked this up over the past few years, but be warned, talk is not turning into action.