Back in 2014, Facebook was criticized after it was revealed that the company only paid £4,327 ($5,357 at the current exchange rate) in taxes in the UK. Now, it has been revealed that the social media giant has paid £4.16 million ($5.16 million) in UK corporation tax last year, that is a huge increase compared to small sum paid in 2014. Facebook managed a turnover of £210 million in 2015, and out of that, £20 million of it was taxable profit. The company paid standard UK corporation tax rate for the taxable profit.
As to why there has been such a huge increase in terms of tax paid, Facebook used to count UK ad sales as taking place in Ireland, but now it has changed its policy so that it has counted UK ad sales as taking place in the UK, though this does not include online sales. In Ireland, there was a tax loophole which allowed Facebook to pay minimal amount of tax based on its huge amount of profit. Of course, this act drew criticism from campaigners and politicians alike, who argued that the company was paying too little in tax and the company was not doing its responsibility of paying tax in countries that it carried out its operations in, which then lead to the change in Facebook’s policy.
With the new policy in place, it likely means that Facebook will be paying a higher amount of tax in 2016 and in the years to come. A company representative for Facebook in the UK has said that Facebook has been able to grow its business in the UK during 2015 and has also managed to create over 300 new jobs. The spokesperson went on to say that Facebook pays all the taxes that it is required to pay under UK law. However, it should be noted that the company has received a £11 million tax credit which will likely help Facebook settle its tax bills in the near future. Facebook was not the only one evading tax payments in the country, as Google has also done the same. Due to that, the UK has introduced a new tax to stop companies from evading tax payments by charging companies a rate of 25%, on any income which is discovered to have been diverted out of the country. This has resulted in Google being forced to pay over £130 million ($160 million) in back taxes to the UK.