back to article Facebook offshores HUGE WAD OF CASH to Caymans - via Ireland

Facebook has reportedly swerved a huge corporation tax bill by paying its Ireland-based parent company - Facebook Holdings Limited - €1.75bn in “admin costs” for its intellectual property. According to the Financial Times (£), Facebook recently reported a pre-tax loss of €626,000 after it paid out those expenses. In 2012, …

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Stop

Not going to happen

Ireland will replace the existing taxation laws with a new set which prohibits the existing "loopholes" but introduces an entirely new set making the net difference negligible.

Companies don't pay the full "perceived amount" of Tax, but Ireland still profits from it. They're not going to cut off a source of income to appease everyone else.

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Anonymous Coward

Re: Not going to happen

Well it might if the EU step in and start making the tax laws (what a disaster that will be)

After-all Ireland are syphoning tax money away from other (larger) EU countries, who might decide to get together and force a set of laws on the entire EU to redress the balance.

Drastic, but you know how the EU loves to impose it'self on everyone.

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Anonymous Coward

Only reason

the UK parliment is putting so much gusto behind their tax dodging arguments against the big corps is so they can gently shove their own tax dodging and embezzlement (aka expenses) beneath the carpet. If they really wanted this fixed, they would sit there telling these big companies "you're very naughty, you shouldn't use tax loopholes, do as I say not as I do!" and they'd actually get of their arses and look for ways to fix these loopholes.

Paraphrasing from evita here.

Instead of government we had a stage

Instead of ideas, a prima donna's rage

Instead of help we were given a crowd

They didn't say much, but they said it loud

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Please remember

That the Accountants selling these loopholes to the International Corps. are the same ones advising the Government on how to write tax law.

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Re: Only reason

Paraphrasing from Evita here.

I would have started with Monty Python:

It's fun to charter an accountant

And sail the wide accountan-sea

To hide, obscure the funds offshore

And skirt the shoals of bankruptcy...

...

It's all tax-decuctible

(we're fairly incorruptible)

We're sailing on the wide accountan-sea

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Re: Please remember

They are writing the tax law in GB. The Treasury and Cabinet Office are infested with SPADs from the Big 4. The present head of HMRC was formerly a tax accountant with the Big 4, specialising in tax evasion.

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Virtual profits

> swerved a huge corporation tax bill

Maybe FB should convert all their excess cash into Bitcoin. That'll soon reduce their profits and thus, their tax bill.

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Long Term Profitability Of Facebook's Business Model

So Facebook have a lot of money, but how long will it last?

As we know, there are many Web 2.0 companies, aimed at what can only be loosely referred to as "social" networking, which I believe are overvaluing themselves, Snapchat at $3 billion for instance and Instagram being bought by Facebook themselves at $1 billion.

I for one think this all might be another bubble waiting to burst and personally I don't think Facebook are currently diversifying enough to be sustainable in the long term.

If we look at other the other major companies mentioned in this article, such as Google and Amazon. Google are expanding into many different markets, Android being a clear success story of that. Amazon are pioneering the online retail sales market, with the obviously dubious drone idea but the much more realistic Amazon lockers.

Facebook however, initially didn't see a market for mobile social networking, and they took their time before coming around to that idea.

All this is of course is referring to 10-15+ years ahead, but surely it's only a matter of time before the bubble bursts.

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Re: Long Term Profitability Of Facebook's Business Model

You're right, they may have a short term expiration date. But that doesn't matter in business as much as what you've got at the moment.

Plans and strategies are all fine and dandy but even the largest businesses are still managed day-to-day. If you've got that money today then you've got tomorrow to try and make some more. And that's the way it goes until circumstances prevent you from having the money today. There is never a certain future in business, ever, no matter who you are or how big you are.

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Starbucks

I see people are still queueing at Starbucks everyday to get their coffee. So much for the 'mass' public outrage.

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Joke

"reported a gross profit of €1.75bn and sales of €1.79bn for the year."

Apple called, they want their profit margin back.

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Anonymous Coward

Fixed it for you

"Google, Amazon and Facebook have been among the big US outfits to come under fire from the UK Parliament, whose politicos have attacked the multinationals for LEGALLY avoiding corporation tax bills."

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Re: Fixed it for you

That's a shitload of metric fucktons of admin costs. I think there could quite easily be good cause to suspect that this is evasion, not avoidance. Allegedly.

I can sell them admin pencils for only £100,000,000 per year. Think how much profit they could make!!!

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Re: Fixed it for you

" I think there could quite easily be good cause to suspect that this is evasion, not avoidance. Allegedly."

That's the real pity. In most countries the existing legislation permits this sort of abuse to be stamped on, hard, as abusive transfer pricing. Funny thing is that they never apply it.

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Good for them

Its nothing to do with us what they legally do with their money. It is a private business and they have paid their public dues.

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Re: Good for them

Yes they have. Absolutely nothing like the percentage they would have paid if they'd been a much smaller company, though, and that's what pisses people off the most. We're used to a tax system whereby those that can afford it the most contribute the most. In the world of these global megacorps it's completely and utterly turned on its head and the very biggest pay a percentage less in tax than the bloke who runs the take-away down the road that is just about akin to paying bugger all. It's a legal interpretation of the complex tax laws, yes, but it doesn't stop it also being the most unfair financial practise and people do have a natural sense of fairness which is screaming that this practise is "wrong".

Of course if Ireland didn't do it another country would and they'd get the global megacorps' dosh instead.

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Anonymous Coward

Re: Good for them

Facebarf is not a private company. Didn't that have an IPO? That makes it a PUBLIC Company and subjewct to a whole load of different rules about behaviour and things like directors selling shares.

Because I don't want to assoiate my name with this odorus company, I'm going anon.

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Re: Good for them

It has everything to do with us. Countries use taxation to provide their infrastructure multi nationals using creative accounting to avoid taxes hurts the country's citizens. On top of this it hurts home grown companies as they do have to pay taxes and can't compete on cost.

Maybe we should be as creative with applying taxation to these multi nationals as they are with their accounting. Maybe those admin costs could be classed as an import and taxed that way. Better still change the laws.

I am not as naive as to think it as black and white as above but it does concern us that multi nationals are avoiding paying taxes even if they are doing it legally as we are the ones that lose out.

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Re: Good for them

It's legal in the way that councils using anti-terrorism laws to spy on people who might be putting the wrong material in their recycle bins or live outside the catchment area of their kid's school is legal. Might not cross exactly the letter of the law an expensive barrister can convince a jury could might technically be valid but it’s an obvious abuse.

These rules were designed to not penalise a company for being international and take account of the different points of the economic cycle around the globe and now they effectively punish companies which are at a national level or lower.

It also allows them to benefit from the regulatory environment here without having to pay their share of the upkeep.

The revolving door between HRMC and the consultants who set these schemes up is an obvious conflict of interest as well.

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Re: Good for them

I wonder how many of the downvoters would cry when their tax avoidance (I assume they dont pay more tax than they are forced to do) is punished by back taxing them for all of their ISA's, expense claims, etc. Because obviously you guys have enough money for luxuries like the internet and there are people who dont have as much money as you so you must be the devil in disguise (or whatever you call it in this witch hunt).

How dare you earn money and legally not give more than you have to to the greedy bastards who dont earn it but are happy to spend it. That is where your bribes come from you know.

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Questionable but legal.

The real question is why those loopholes aren't closed at faster rate ?

They most probably benefit our EU Govts ... otherwise they would have done something about it. The only thing we see is a wee bit of public outcry followed by sod all.

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Re: Questionable but legal.

We don't see any public outcry at all, what public outcry? What you really mean is we are told by the politicians and the media that we should be outraged and that indeed we are. But I am yet to meet anyone who is truly outraged, we are all still using these companies. There is no outrage, we are just being told we should be for many reasons.

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@bigtimehustler

Oh there's a public outcry. Remember this is Blighty. A public outcry is when we're all tutting down the pub about Starbucks not paying ... how much tax... hang on let me Google that on my iPhone...

The only Boycott we know is the bloke whose grandmother plays cricket with a stick of rhubarb in the corridor of uncertainty.

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Re: @bigtimehustler

Well, I do find it quite the opposite to be honest, most people understand that their own tax bill is ludicrous on a personal level and when we talk about the types of figures in play at a company level, most people agree that they too would do the same. I haven't met anyone outraged, most people either blame the politicians for the current tax laws or just empathise that tax rates are too high and so people go to crazy lengths to avoid them. If I was earning say 2 million a year, would i want to pay around £800,000 odd in tax, of course I wouldn't and no sensible person would think anyone should. This is why individuals of wealth or corporations of wealth avoid it. It doesn't serve the government because people don't pay it, so why not lower it and at least get some money!?

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Makes you wonder why European Governments allow themselves to be ripped off by tech giants this way - especially the British, the Cayman Islands is a British Overseas Territory.

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Anonymous Coward

balancing the books

given the size of the company, and the money sloshing around, to balance the books to within €626,000 is not bad, not bad at all! ;)

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Devil

Corporatist Doublespeak Correction Filter...Engage!

Facebook defended its actions by saying it "complies with all relevant corporate regulationsavailable corporate tax-dodges, schemes and scams including those related to filing company reports and taxation that our lawyers can concoct."

There. That's more like it (more accurate, atleast...)

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Anonymous Coward

Fraudulent misrepresentation?

By pretending that a payment to Ireland was to cover "admin costs" that could not possibly have been incurred by that entity (which has few employees and low expenses), FaceBook may be open to a charge of fraudulent misrepresentation.

Should the transactions be assessed as what they really were - a profit transfer to offshore accounts - the penalties would be confiscatory and criminal.

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Re: Fraudulent misrepresentation?

Of course you're right but I'd dearly like to see an itemised list of what they're paying for: €1 mil for opening the envelope, €2 mil for lifting the cheque out of the envelope , €3 mil for readings the cheque...

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Anonymous Coward

How about an IP ban on all Facebook owned or operated servers until they pay their "fair share" of tax

personally i would call this a win win solution

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If people post on Facebook....

About Facebook dodging taxes, and get likes through Facebook, which gets ad revenue.....

Does Facebook explode after becoming sentient and discovering the true description of irony?

Steven R

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Megaphone

Fine by me

This is fine by me. I pay the minimum amount of tax that I'm legally obliged to as well. I assume all those complaining about the actions of these companies must be making additional voluntary tax donations themselves? No, didn't think so.

It's a publicly-traded company and its responsibility is to its shareholders. If I was a shareholder in such a company I would damn well hope that they were paying only their minimum legal tax obligations.

Oh dear, I feel a rant brewing...

"Oooh it's morally repugnant" say the politicians, as if a politician can be morally superior to anyone or anything. By definition that is impossible. What is morally repugnant is consistently failing to change the laws, which is essentially your job, and instead blaming others and trying to guilt trip companies into paying more tax than they should. What, the rules are too complicated to change? Shut your faces then.

Yes I'd like to see a country have more money to be able to ensure the entire population is healthy, well educated and has the best opportunities in life. But I believe that tax payers (personal and corporate) already give governments more than enough dosh to make this possible. Unfortunately governments appear to be incapable of not wasting most of it. Give our government access to more money? Only once they've proved to me that they can spend what they already get responsibly.

Apologies for that outburst. Felt good though :)

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Re: Fine by me

I understand (and to a point agree) with what you are saying but what really bothers me is that these companies are allowed to bribe, sorry lobby, politicians that we elect and we pay every month to pass laws that suit themselves and not the general good. If there is logic in reducing the tax companies pay (and there may well be) then this should be done properly. A by the back door approach screws local companies who aren't large enough to fiddle the books and Germany has shown exactly how important small to medium sized local companies are to an economy. The sooner we reign in the brown bag approach to law making the better, laws should not be for sale and should offer equal protection.

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Re: Fine by me

If the big companies paid their fair share of taxes then either, a) you'd have better public services, b) lower taxes, or c) both a and b. But I guess not having better public services for no cost to yourself is fine by you as well?

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Re: Fine by me

@ Dominion

"If the big companies paid their fair share of taxes then either, a) you'd have better public services, b) lower taxes, or c) both a and b. But I guess not having better public services for no cost to yourself is fine by you as well?"

I want to thank you for making me laugh so hard. You are aware of the debt the various countries are in? This is after introducing more and more tax's due to their excessive borrow and spend policies. If these companies paid all the tax YOU think they should then they would employ less people, possibly leave the country entirely and the gov would still demand more money.

And even through the boom years with lots of money + government borrowing to spend even more we had rubbish public services. The solution has yet to be found to fix public services but throwing more and more money at them has been tried and failed.

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Re: Fine by me

@ Dominion

No not at all. My point is that of all the low-life scum bucket organisations I want to see in charge of the fair distribution of my tax money, our central government in its current form is not deserving of more, no matter how much they plead. Their track record of waste and mis-placed priorities is abhorrent. I would prefer, and do, give modest sums of money to charity which attempt to remedy the social problems that successive government consistently fail to address.

In any sensible system politicians would be paid on performance of their division/department or attendance. Not because, they think they've done such a super job across the board.

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it's not admin costs

Facebook Irish company I did not pay over 1.75 billion in admin costs to Facebook Irish company 2. It was royalties for the use of the Facebook name and technology.

"But the method could soon be stamped out by bringing an end to "stateless companies" in Ireland, it's been reported."

Not so much. It's Apple that has a company with no tax domicile in its Double Irish structure. Facebook does not. Facebook Irish company 2 is tax domiciled in the Caymans. So cracking down on companies with no tax domicile won't make any difference to Facebook.

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Easy?

Surely all you've got to do is tax all cash taken out of the country above a certain threshold. Say, anything over a million quid per year at 21%. Easy!

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