Facebook may have broken tax rules

LONDON: Facebook said it would ditch a corporate structure that helps minimize its UK tax bill, prompting lawmakers and campaigners to ask whether the arrangement had ever complied with UK tax rules.

Facebook said on Friday it would stop booking sales to major UK clients via an Irish subsidiary and in future report sales agreed by UK staff in Britain.

“In light of changes to tax law in the UK, we felt this change would provide transparency to Facebook’s operations in the UK,” the company said in a statement.

The change follows the British government’s introduction last year of a new tax on profits shifted offshore.

“From the start of April … UK sales made directly by our UK team will be booked in the UK, not Ireland,” Facebook added. The California-based company declined to say if it currently booked sales made by UK-based staff, to UK clients, in Dublin. If it did, this would break UK and international tax rules, which require companies to book sales where they are made. Caroline Flint, member of parliament (MP) with the opposition Labour party, said the statement “raises more questions than it answers”.

“Facebook are trying to improve their corporate reputation but, in so doing, they appear to have confirmed that UK-based staff were conducting UK sales in the UK, but artificially diverting that income as though it was generated by Facebook Ireland,” she said.

Labour MP Nick Smith said the UK tax authority, Her Majesty’s Revenue and Customs (HMRC), should have challenged Facebook’s arrangement before now.

“Both HMRC and Facebook need to be brought to book over this,” he said.

“HMRC should not just give Facebook a wrap over the knuckles over this,” he added.

A Facebook spokesman said “we are compliant with UK tax law”.

A spokesman for the tax authority said “HMRC ensures that all multinationals pay the tax due under UK law”.