Facebook has overhauled its UK tax structure and is “set to pay millions of pounds more in tax in the UK” as a result, according to the BBC. Like Google, Facebook makes the majority of its revenues through the selling of ads, and also like Google, it is responding to increasing pressure to account for those sales in the proper jurisdiction where they are made and to pay tax accordingly.
The present change for Facebook is said to include only big advertisers — companies like Tesco, Sainsbury’s, and Unilever — and will not affect smaller ad sales that are booked online. With respect to the big business deals, Facebook will treat them as UK sales and no longer channel them through Ireland, meaning it will pay a significantly larger tax bill. The changes go into effect from this April and Facebook’s first bumped-up UK tax bill will arrive in 2017.
The BBC cites an internal Facebook memo that says, “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 specific tax law change isn’t named, but it’s highly likely to be the so-called Google tax, which was implemented last year to try and prevent companies from diverting their UK profits overseas. Any income that’s deemed to have been inappropriately diverted is taxed at 25 percent, higher than the regular corporate tax rate, and so Facebook looks to be falling in line to preempt falling foul of the legislation.
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