Services & Software

Facebook comes under fire for alleged tax evasion in U.K.

British accounts say the social network paid taxes on only 11 percent of its sales. It could do this because its European headquarters are based in Ireland, which has lowered tax incentives.

The U.K. is accusing Facebook of dodging taxes in 2011. According to the Guardian, tax experts said that the tech company reported lower sales figures than estimated and explicitly set up its headquarters in Dublin, Ireland, to reap the benefits of lowered tax incentives for corporations.

"The U.K. is being taken for a ride," Tax Research U.K. director Richard Murphy told the Guardian. "Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it."

Facebook paid $313,345 to the U.K. Treasury in 2011, according to the Guardian. However, the social network's records show that it paid each of its local staff an average of $439,890 for the year -- essentially totaling more than all of its paid U.K. taxes combined. Additionally, Facebook reported its U.K. revenue as roughly $32 million, while analysts estimated that the firm actually made around $280 million, reports the Guardian.

"As is normal for an organization operating in dozens of countries around the world, we regularly file reports about local operations," a Facebook spokesperson told CNET. "The information does not necessarily present a full account of overall global financial performance so it would be a mistake to draw any conclusions from these filings."

One of the reasons that Facebook was able to pay such obviously low taxes is because it has set up its European headquarters in Ireland, which has a far lower tax jurisdiction than England. According to the Guardian, because of Facebook's arrangement with Ireland, the company was able to declare only 11 percent of its total U.K. sales.

However, Facebook told the Guardian that the reason its headquarters are based in Ireland is because of good local staffing.

"We have our international headquarters in Ireland that employs hundreds and a series of smaller local offices providing support services all over Europe," a Facebook spokesperson said. "Dublin was selected as the best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe."

Facebook isn't the first tech company to be accused of setting up shop in Ireland and taking advantage of its lower tax incentives. Apple also came under fire this year for allegedly putting together elaborate tax-evasion schemes both the U.K. and the U.S. Amazon and Google have also been accused of avoiding taxes in Britain.

Updated October 11 at 10:25 p.m. PT with comment from Facebook spokesperson.