Facebook met fresh criticism today after filings showed it paid just £2.6m in tax on profits of over £800m.
The US-based company operates in numerous countries around the globe, but puts all of its transactions outside of its home territory – namely sales of advertising on its site – through its offices in Ireland.
In 2011, Facebook said it made profits of £840m outside the US. However, by directing its sales through Ireland, using an accounting technique colloquially known as ‘Double Irish,’ it was able to pay less than a 300th of that value in tax.
This meant it managed to legally pay only £238,000 tax in the UK.
From Ireland, companies are also able to make royalty payments to other locations, meaning Facebook Ireland itself managed to report a £15m annual loss despite looking after such a large portion of the social network’s business.
Facebook defended its actions, with a spokeswoman telling Computer Weekly: “We have our international headquarters in Ireland that employs over 400 people and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multi-lingual hi-tech operation serving the whole of Europe.”
"Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation."
The same system has been used by the likes of Amazon and Google to avoid paying higher taxes in the UK, and both these firms have been brought in front of parliamentary select committees to explain their reasoning. Facebook has so far avoided this fate.
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