Reports that Facebook Inc. (NASDAQ:FB) paid just £4,327 in UK corporation tax in 2014 continues to evoke reactions. Questions continue to erupt especially on the fact that the social giant generated more than £700 million in revenue that year. The standoff is already threatening to spill over into a major tax avoidance scandal.
Tax Avoidance Scandal
Facebook Inc. (NASDAQ:FB finds itself at the center of a fierce storm on reports it pays about 4% in corporation tax around the world. That is way lower considering the UKs standard corporate tax stands at 21%. In 2014, the social giant reportedly paid $86 million in taxes to all jurisdictions of operation outside the US. That is despite generating £2.4 billion in profits.
The discovery is already adding to controversy over tax avoidance in the UK. Legislators are already up in arms against Alphabet Inc (NASDAQ:GOOGL)’s ‘sweet deal’ which allows it to reimburse the government £130 million for taxes spanning over ten years.
Paying staff with shares and channeling most of the earnings to the Cayman Islands has been the order of the day for the firm in the UK. However, tax authorities are slowly catching up with its practices even as it emerges it is resisting investigations from the HMRC. The agency is reportedly probing the firm’s tax practices between 2010 and 2014.
Facebook Inc. (NASDAQ:FB is not the only firm to evoke outrage over its tax practices. The European Competition Commission has already indicated it could probe Google tax practices as well. The probe will mostly focus on the fact that the search giant is set to pay £130 million to cater for taxes while avoiding fines and penalties.
Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Starbucks Corporation (NASDAQ:SBUX) are the other multinationals under probe in the region. The probes have already rattled senior US officials who believe European officials are running discriminatory investigations against US firms.
Facebook Inc. (NASDAQ:FB is fresh from posting a 52% increase in revenue in the recent quarter. Higher ads revenue on mobile continues to steer the impressive run.