The real questions we should ask about Facebook and tax

http://www.theguardian.com/commentisfree/2015/oct/12/facebook-tax-politics-power

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Years after the first corporate tax abuse scandals emerged, Facebook is the latest company to cause offence. In 2014 it apparently paid £4,327 of corporation tax when its UK turnover was more than £104m. Like most people, I am shocked by this, but not for the obvious reason that this sum is apparently so small. I am annoyed that we just cannot know if this figure is appropriate or not.

Because of this uncertainty I can already hear the responses from rightwing defenders of corporate tax abuse getting their comments ready to roll. They will say tax is not paid on the sales figure but on profit, and that is true.

Then they will say Facebook made a loss of £28m in the year. But the problem is, this figure is almost certainly not true. Payments of £35m in shares to employees have supposedly been made and the company has, I note, not recognised these sums as due on its balance sheet, where it implies it actually made a profit of £7m in the year, which is much more likely to be the correct figure. It’s absurd that two such differing views can be included in one set of accounts.

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Then those defenders of abuse will say the tax bill was reduced by losses from earlier years. The accounts suggest that is the case, and that there are another £21m of such losses to be used as yet. As a result, we can be pretty sure Facebook will not be paying tax in the UK for quite a number of years to come. As a result I suspect the actual tax paid for 2014 was really precisely nothing at all, and not even the pitiful sum the accounts reveal. But it’s crazy that the sum really paid in cash is not disclosed because Facebook does not legally have to declare such basic data.

So the questions arising are threefold.

Do we know enough?

Do these accounts allow us to really form a view on the right amount of tax Facebook should pay? The answer is glaringly obviously no, or the outrage would not have happened.

Could we know enough?

The answer is very obviously that yes, we could. As I have long argued, companies could do vastly more to explain how their tax bills arise. Instead, Facebook has chosen to do the minimum amount of explaining possible, at the last legal date possible.

This is not the behaviour of a company that is seeking to explain what it is up to. This is unacceptable in the 21st century. Given that accounts are meant to show a true and fair view of what is going on, and the reasonable reaction is that they don’t appear to, then the company should be embarrassed, its auditors should consider their position and our politicians, who refuse to improve corporate accounting and tax requirements to end these continuing debacles, should also be on the rack for their failure to impose reasonable reporting standards on companies trading in this country.

How much tax should Facebook have paid?

Who knows? I don’t. All we know is that right now we have a tax system that lets it get away with paying very little tax and accounting standards that do not require that it properly explain why this is the case.

Blame the company and blame the accountants by all means. But really this is all about the politics of power, and our politicians are letting accountants and companies get away with this by deliberately letting them leave us in the dark. So it is Westminster that has to carry the blame. The real questions are, then, why are our politicians doing this, what is it they don’t want us to know, and why?