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The Fools Screaming About Facebook’s Taxes

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We are at that time of year again, where the fools start shouting about Facebook’s tax payments. The latest wonder is that their tax bill barely shifted. How could this be?

Facebook has been told to “pay its fair share” to British coffers after its latest accounts showed only a slight uptick in its tax bill despite profits surging by more than a quarter.

The social network’s filings revealed its corporation tax increased to £40m from £30.4m a year earlier, meaning, including deductions for employee share awards, it paid £33.5m to HMRC.

However, after further adjustments for deferred tax credits, which it expects to receive in future years, Facebook’s total income tax expense came in at £28.6m for 2019, only slightly higher than the £28.5m logged for the prior year.

A simple explanation is to look at Facebook’s – the parent company – accounts for the year in question:

Profits declined in 2019 with respect to 2018. No, I don’t know why either but there it is. So, lower profits, we’d expect there not to be more tax really.

Quite why those doing all the shrieking aren’t willing to make such simple checks is unknown.

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4 COMMENTS

  1. I suspect that the reason is that we’ve reached “Peak Facebook”. Those who used to spend all day cyberloafing there are now doing it elsewhere. By partner recently tried to signup for a new Facebook account and the “Real User Verification” stuff was a significant barrier to doing so (detailed profile, active telephone number, etc.) and was still essentially blocked. In addition, they are now requiring new users to upload a video as part of the signup to prove that they are real humans.

    All of this leads me to believe they are trying to increase the quality of their user base to attract a higher premium from advertisers. Still, I can’t see anything different from MySpace. If the attacks against Facebook’s tracking and invasion of privacy continue (as evidenced by Apple CEO Tim Cook’s refusal to give way) then I can only see Facebook diminishing over time. This is a good thing for users, but a bit of a nightmare for employees and shareholders.

  2. The article claims profits surged by more than a quarter, Tim says they declined. Is this the usual case of the journo looking at 2020 income & 2019 taxes or something else?

  3. I can’t access the Terriblegraph story but the I news account says FB recorded gross profits of £1.04bn and administration costs of £918.7m, leading to a pre-tax profit of £115.7m and corporation tax of £28.5m. This sounds about right, right?

    The I news story (written by an experienced finance hack I happen to vaguely know) leads on the ‘mismatch’ between gross UK profits and the UK tax bill (boo! hiss!), presumably because that is the editorial line he is require to take but goes on to explain that FB pays most of its tax in the US, as The Donald’s tax reforms encouraged firms to do.

    • Yes. Plus one more thing. Facebook pays employees partly – perhaps majorly – in stock. In the English accounting system profit is declared before the costs of such options. Tax is calculated upon the profit after the costs of such stock awards. Anyone who pays staff in stock will, by the method being used in that article, therefore have a low effective tax rate.

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