In the US right now, technology firms like Facebook are rallying behind Apple’s refusal to comply with a potentially overreaching order from the FBI to undo device encryption, but across the pond in the UK, tech companies are facing a much more familiar battle. After years of big names in tech like Apple, Facebook and Google using every loophole available to pay less tax in the United Kingdom it now seems as if something is finally going to be done about it. Earlier this year, the UK Government succeeded in making Google pay more tax, but after further examination the “huge success” of the UK Government amounted to a paltry amount of just £130 Million worth of taxes from a period of 10 years from 2005 to 2015. Now, it’s Facebook’s turn to pay more tax and it appears as though the social network is taking it upon themselves to make these changes.
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As the BBC is reporting, Facebook is to stop routing their sales through holdings in Ireland – a favorite trick of Apple and Google’s to pay tax at Ireland’s lower tax rate – and instead declare earnings as Facebook UK. This new information comes from an internal memo that the BBC had attained and says that “from the start of April, they will receive invoices from Facebook UK and not Facebook Ireland”. This refers to big advertizers, such as supermarket chain Tesco, that pay Facebook huge amounts of money to further their exposure. The memo goes on to say that “in light of changes to tax law in the UK, we felt this change would provide transparency to Facebook’s operations in the UK”. The change to tax law in question is the new ‘Diverted Profits Tax” which placed 25% tax on companies that would use loopholes to pay less tax in the UK.
The change won’t come into affect until this April, the start of the new tax year in the UK, and come April 2017, Facebook UK should have a much larger tax bill to pay. Back in 2014, Facebook only paid £4,327 ($6,643) despite making roughly £30 Million before tax. Public opinion has turned recently on the likes of Apple, Facebook, Google and even more traditional firms like Amazon and Starbucks as they all continue to find loopholes to pay as little tax as possible in the UK. Facebook has probably scored not only some positive public opinion with this move, but also possibly a future investigation from the UK Government itself.