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In Defence of Facebook Tax Dodgers : The Left Just does not get it

Tom Winnifrith
Thursday 11 October 2012

Facebook (FB) is under attack today for paying just £238,000 in corporation tax last year. I am the last person to want to defend Mark Zuckerburg’s enterprise. The shares are grossly overvalued even after almost halving from May’s $38 IPO. I still reckon they will more than halve again. But on this occasion it is the left (MPs, the Independent, the BBC – and its sister publication the Guardian) that just does not get it.

If you want to read why Facebook is worth just $5 a share click HERE

Firstly it is estimated that Facebook generated revenues of £275 million in the UK. The Independent complains that it is paying just 0.136% tax on its earnings. No it is paying tax of 0.136% on its sales. That is a bit harsh. I know Zuckerburg is an easy target but most companies pay tax on profits and facebook should be treated the same as everyone else. But expecting a left to grasp basic economics is perhaps a bit of an ask.

The more damaging accusation is that while facebook is booking costs in the UK it books revenues through low tax Eire so that it pays more tax there and less in high tax Britain. Well it probably does. So does everyone else in the e-word as the Indy admits. Google, etc – they are all at it.

The fact is that it is very hard to show where revenue is generated in the internet world. I happen to live in the UK. This website is owned by an IOM company. Our server could be in the Ukraine. If I moved (and I serve up the content) to Albania (tax rate 10%) where do you think our revenues would be generated? Discuss.

And so it is with facebook etc. The UK has two choices. Keep tax high, pretend we are still in the 19th century where the means of production are tied to one location, and watch anyone with an international business and smart accountants pay a low rate of tax. Or make corporation tax competitive and watch tax receipts go up. Simple. For too simple for lefties to grasp.

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About Tom Winnifrith
Tom Winnifrith is the editor of When he is not harvesting olives in Greece, he is (planning to) raise goats in Wales.
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