[News] Facebook - doing their bit for UK plc

[Herr Tubthumper]

On the bonus' of 35.4m paid income tax of 40% would have been paid. Money to the HMRC. Had they declared that as profit instead corp tax would have been paid at a lower rate, so less money to HMRC. They did us a favour paying a bonus instead of making a bigger profit.

Awaiting corrections by those that know.

Assuming it was all paid in PAYE employees salary which I very very much doubt.

 

[Bozza]

Assuming it was all paid in PAYE employees salary which I very very much doubt.

This is my line of work. I'm struggling to think of how these would not be fully PAYE-able.

 

[dazzer6666]

On the bonus' of 35.4m paid income tax of 40% would have been paid. Money to the HMRC. Had they declared that as profit instead corp tax would have been paid at a lower rate, so less money to HMRC. They did us a favour paying a bonus instead of making a bigger profit.

Awaiting corrections by those that know.

Doubt it.....probably paid most of the bonuses in shares, giving the employee the ability to avoid tax depending on vesting periods etc.

 

[mikeyjh]

Doubt it.....probably paid most of the bonuses in shares, giving the employee the ability to avoid tax depending on vesting periods etc.

It's all been paid in shares - I assume they will take the form of a long term incentive plan, so I'm not sure that they will have paid 40% of much at all...... but as is pointed out in the Guardian, law makers could do more to force some clarity in these organisations, and Facebook could be far more open about their affairs....

I don't understand those who defend corporate tax avoidance, it makes no sense - It's even more bizarre than the argument that says bankers will up sticks and leave if we tax them at 50%. Amazon, for instance, are not going to up sticks and stop doing business because we make sure they pay their fair share of tax.

 

[Herr Tubthumper]

This is my line of work. I'm struggling to think of how these would not be fully PAYE-able.

The article suggests the average share bonus for their UK staff alone is 96k so it seems we are talking a lot of fairly high salaries for a lot of people as this is an average. At that level I'd be very very surprised if the salary was not a mix of pension payments, shares and salary and other stuff. My point is it's not a simple 40% tax calc as was suggested in the post I quoted. It will be less.

 

[El Presidente]

On the bonus' of 35.4m paid income tax of 40% would have been paid. Money to the HMRC. Had they declared that as profit instead corp tax would have been paid at a lower rate, so less money to HMRC. They did us a favour paying a bonus instead of making a bigger profit.

Awaiting corrections by those that know.

You're assuming the people they paid were all paying tax here in the UK. Many will be non-doms and so no tax will not be paying tax on their full income, if they were paid in shares instead of cash then again they won't pay income tax on those elements of their earnings.

 

[tinycowboy]

Also, I presume it isn't just wages and salaries that are reducing the profit to zero? I could be wrong, but I suspect there may be a large recharge to an overseas member of the Facebook group that is contributing to this?

 

[KZNSeagull]

The article suggests the average share bonus for their UK staff alone is 96k so it seems we are talking a lot of fairly high salaries for a lot of people as this is an average. At that level I'd be very very surprised if the salary was not a mix of pension payments, shares and salary and other stuff. My point is it's not a simple 40% tax calc as was suggested in the post I quoted. It will be less.

Avg salary 26.5k a year. The 96k bonus was in shares, so surely they will only pay tax on that when/if they sell them?

 

[Herr Tubthumper]

Avg salary 26.5k a year. The 96k bonus was in shares, so surely they will only pay tax on that when/if they sell them?

Quite possibly. This was part of my point.

 

[Herr Tubthumper]

You're assuming the people they paid were all paying tax here in the UK. Many will be non-doms and so no tax will not be paying tax on their full income, if they were paid in shares instead of cash then again they won't pay income tax on those elements of their earnings.

True. If any of those people payed were living outside the UK then it's nothing for the UK tax man.

 

[Triggaaar]

As much as I'm angered by the tax dodgers, they have not broken any laws so my anger is directed at our law makers who seem incapable of drawing up regulations that can't be given the swerve by lawyered up and greedy multinationals.

Indeed. I don't know why it seems impossible to change the laws so that we can tax these companies. I'm not wanting to turn this into an EU debate, but we might be more capable of doing something about it if we were independent.

 

[Triggaaar]

The Press very conveniently over look the fact that far more tax will have made
It's way into the UK economy through structuring things this way.

Lefties will no doubt focus on the corporation tax figures while clasping their hands over their ears and 'La La La' ing over any of the other facts

So the staff of Facebook are paying more tax than the company that's making billions, and you think that makes it ok? Sure the headlines don't mention that we also get some tax from the employees, but the fact is facebook make a lot of money, and don't pay their share of tax.

so, you wouldnt want those profits made companies abroad to be brought into the UK to be taxed here, rather it should be taxed there? say HSBC, Standard Chartered, or SAB, selling billions overseas and pay tax here.

Eh? You think HSBC make £billions abroad, and pay tax on it here? I don't think so.

the problem in all of this is that bit in the middle, where the country they make the profit is. does Facebook make a profit in UK?

Yes. It gets money from advertising space that is on our computers here. It's making it in the UK market.

in the US, in Germany, Brazil, etc? i know they shift things around to their benefit, but assuming they didnt exactly where do we think a multinational makes its profit. not revenue or sales, but the bit after everything is paid for.

It would be spread across those countries much as its revenue is. Obviously these companies would be happy to work the books to make it look like they make no profit in some countries, and all of it in a country where they don't have to pay tax. This is of course ludicrous, and we should find ways of making them either pay tax, or stop working here.

does Apple make its profit in the US, where all the designers and programmers work, or in China where they manufacture, or in the location where the product is sold? we cant answer that easily for a physical product

Where it's sold.

how difficult is it for web services viewed in UK, hosted out of Ireland, owned and created by company in US. dont have the answer, only showing its complex.

Where it's sold.

 

[beorhthelm]

... if they were paid in shares instead of cash then again they won't pay income tax on those elements of their earnings.

is it not the case that shares given as bonuses are taxed at the normal income rates, unless they are options, in which case there's a CGT when sold?

 

[El Presidente]

is it not the case that shares given as bonuses are taxed at the normal income rates, unless they are options, in which case there's a CGT when sold?

I'm not a tax expert but if they are shares in a foreign company (e.g. Facebook) and the employee is not domiciled in the UK when they're sold then no tax is paid.

I think we're in nerd territory here!

 

[beorhthelm]

...Where it's sold.

fair enough, simple answer. problem: say Apple UK sell a phone for £500, Apple US will sell it to the UK office for £500, so there's no tax to pay (to put it crudely, probably sell for an amount less costs of sales and marketing teams).

[Facebook]It gets money from advertising space that is on our computers here. It's making it in the UK market.

it makes revenue in the UK, but does the UK office make a profit? we only tax companies on their profit. where are the costs of development and infrastructure? Odin knows what those 360 odd people are doing in the UK office (especially to earn that bonus - thats a story being overlooked), but the vast majority of their staff and servers are in the US, so the costs are there. the EU operations are based in Ireland, so a bunch of costs there.

and yes, HSBC does make profits abroad, and those profits get taxed here (if they don't get taxed directly in other countries). exactly the same way as Facebook and Apple will shift their overseas profits to US.

we could probably find ways to make companies that dont pay tax here not operate here, but people will still seek out their products and services, and on the grey market obtain them, and in the case of the internet just log on to the foreign server (which we're often doing anyway). unless we erect a large firewall to non-UK systems.

 

[Triggaaar]

fair enough, simple answer. problem: say Apple UK sell a phone for £500, Apple US will sell it to the UK office for £500, so there's no tax to pay (to put it crudely, probably sell for an amount less costs of sales and marketing teams).

Well obviously that's what they're all doing at the moment. Starbucks 'chooses' to buy its coffee from Starbucks Luxembourg, despite the fact that Starbucks Luxembourg charges 10 times the going rate.

We should be trying to make the law so that if you sell a product here, you pay tax on the sale price, less the going rate of the supply. So Apple UK couldn't pretend it cost them £500 to make each phone.

yes, HSBC does make profits abroad, and those profits get taxed here (if they don't get taxed directly in other countries).

No they don't get taxed here, because yes they do get taxed in other countries instead.

exactly the same way as Facebook and Apple will shift their overseas profits to US.

I'm surprised if they shift their overseas profit to the US rather than another country with more beneficial tax rules?

we could probably find ways to make companies that dont pay tax here not operate here, but people will still seek out their products and services, and on the grey market obtain them, and in the case of the internet just log on to the foreign server

We could certainly stop them. If you want to sell products in the UK (or ship them here), you pay tax here - that's Amazon and Starbucks. And yes, we could ban facebook here if they refused to pay their tax here. Facebook wouldn't work if everyone had to be on a foreign server, not many people do that.

 

[beorhthelm]

We should be trying to make the law so that if you sell a product here, you pay tax on the sale price, less the going rate of the supply. So Apple UK couldn't pretend it cost them £500 to make each phone.

so you want government controlled prices, they will decide how much goods or services are worth and tax accordingly? this is the logical consequence, as you cant otherwise say exactly how much the Apple phone cost to design, develop, manufacture, ship and market. especially when most of those costs are seen abroad.

of course the companies shift the taxes to where it is most beneficial, along the way incurring as much internal cost as practical. in the end the rump goes to where the head quarters is based - which is probably tax efficient. my point here is this isn't a one way street, we are the recipient of this process too.

Facebook is already run on foreign servers, in Ireland, along with a lot of others (Google, Amazon, Microsoft), the internet doesnt really recognise national borders. frankly i'd be happy to see Facebook banned, but no one if refusing to pay tax, people are upset/annoyed/confused at perception of how much tax is being paid.

 

[Triggaaar]

so you want government controlled prices, they will decide how much goods or services are worth and tax accordingly?

No, you're being silly.

this is the logical consequence, as you cant otherwise say exactly how much the Apple phone cost to design, develop, manufacture, ship and market. especially when most of those costs are seen abroad.

If a company wants to operate here, they should abide by the rules, and those rules could involve them detailing all of their costs, and it could be up to the UK courts whether those costs are reasonable or not. Don't like the rules, then don't sell stuff here. Apple can't pretend the £500 phone costs £500, and Starbucks can't pretend their coffee costs as much as the sale price either. The UK can tell Apple what we'd expect the costs of the phone to be, and if Apple think it should be higher they'll have to justify it.

of course the companies shift the taxes to where it is most beneficial, along the way incurring as much internal cost as practical. in the end the rump goes to where the head quarters is based - which is probably tax efficient.

And we should prevent that.

my point here is this isn't a one way street, we are the recipient of this process too.

How so? Why would a large multinational company have its headquarters here instead of a tax haven?

the internet doesnt really recognise national borders.

It's up to the UK what it allows. We can make the rules that if you want your company on screens in the UK, you pay the tax.

 

[Arthritic Toe]

I dont get the 'foaming at the mouth' Daily Mail style anger about this.

Countries make tax rules. Countries choose to join trade agreements with other countries. Companies operate in those marketplaces and pay tax according to the rules. They will minimise their tax within the rules.

You and I do the same thing when we buy an ISA.

 

[KZNSeagull]

is it not the case that shares given as bonuses are taxed at the normal income rates, unless they are options, in which case there's a CGT when sold?

Taxed when they receive them? No, they cannot be. How could someone earning 26k a year afford to pay income tax on 96k worth of shares without selling them? Income Tax on 96k is more than they earn in a year gross!

Shares are not worth anything until they are sold, so they would pay tax only when sold and also pay tax on any dividends whilst they hold them.