I have already offered a long analysis of Facebook's accounts. But in that fairly technical analysis I did not say what really irks me about the UK accounts. Three things do.
First, it's the sheer contempt Facebook show for having to pay their way for the right to trade here. If Facebook was not really profitable in the UK it would not be paying its staff so much. But it seems to want us to subsidise that pay and not make any long-term contribution for actually making money here. That feels like a complete snub.
Second, it's the contempt of filing a set of accounts saying they're for Facebook UK when they clearly are not because none of its sales in this country were in them. I know this is going to change, but the annoyance remains.
And third? It's that company and tax law says all this is true and fair when it so obviously is not.
That lot irks.
And so it should.
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GCHQ has servers installed at key nodes on the UK mobile network. This helps them with traffic intercepts. Perhaps it is time for HMRC to have servers which ensure that companies delivering services in the UK also pay taxes in the UK. The ability to turn off Facebook (& twitter) whilst causing some users to go cold turkey would focus minds in other locations – sort of “no access to infrastructure without tax payment” (infrastructure = not just hardware but people/law structures etc). & for those that say this cann’t be done – well GCHQ intercepts all internet traffic into & out of the UK – selectively interecepting & disabling Facebook traddic – for example – would be trivial. Hell it could even look like an “accident” – they’d soon get the message.
A sentence in “The Panama Papers” stood out for me, it said – “the members of the international elite are effectively constructing their own legal systems”. To that could be added “and their own accounting and auditing systems”.
How can anyone believe that managers below the CEO are operating without segmental data?
If true this surely also means that at the start of the year the entity does not know if it is intending to earn a profit or a loss in that trading area, how can that be consistent with the fiduciary duty of the directors?
It is my aim to take accounting abck
You are not happy with their taxes: it would be interesting to see who is happy – in HMRC, Parliament and the media – and ask why.
The analysis of Facebook accounts was interesting and some of the recommendations I agree with but there is a danger of wanting the accounts to achieve something that accounts are not designed to do. At end of day year end accounts are only there to provide information that is true and fair (and prepared in a broadly consistent with how other companies in same industry prepare accounts) to allow outsiders to understand the state of the business and its profitability (or not).
There is therefore a complete difference between published accounts and tax accounts.
I also take issue with the idea that a company must pay tax to trade with UK customers. This is clearly nonsense, there are thousands of companies around the world with UK customers who do not pay UK tax – they are called exporters (or importers if you are in UK). The issue with companies such as Facebook and similar is that they do have a UK physical presence (usually UK incorporated companies) and it is monumentally unclear what that presence actually does – inevitably it is described as “sales and marketing assistance” but no one really knows what that is. That is the issue which concerns me because if incorrectly described then existing UK law (the google tax is a sticking plaster not a cure) is not being correctly applied.
What we forget at our peril is that for digital companies there is no business requirement to have any base in the UK. Organising all European business through a single central location is an entirely normal business practice. If we are not careful (and a low tax rate helps) companies such as google will ensure that the UK arm is entirely independent and does genuinely provide marketing assistance only and then we get no tax at all
I want accounts that show a true and fair view
So do all users
These don’t
As for your tax comments, I won’t bother to respond to nonsense
Were you paid to write this?
err…. profit is what you make *AFTER* paying your staff. You can make humoungous profits if you pay your staff peanuts. Is that what you’re advocating?
I have now idea how you got to that comment
Sorry, are you asking me to explain /maths/?
Profit equals (all money coming in) minus (all money going out).
Wages is part of (all money going out).
When you you subtract a bigger number from another number the answer gets smaller. 100-30 gives 70, 100-40 gives 60. 60 is smaller than 70.
Profit is a function of wages, not the other way around. As your wages bill goes up your profits goes down, because profits is what you are left with /after/ you have paid your wages.
Sorry, too technical there, “is a function of” is maths-speak for “is caused by”. (Do I have to explain “is caused by”?)
If you have 100zb coming in and you spend 40zb on non-wages and 40zb on wages, your profits are 100zb-40zb-40zb which is 20zb. If you increase your wages to 60zb your profits are 100zb-40zb-60zb with is 0zb. You have made *NO* profit, but you have paid your workers more than when you made a profit.
Yes, you could use the rules of maths to write that wages are a function of profit, but that would be to write the causality the wrong way around, like saying that the brightness of the sun is a function of how much sunscreen you use. Profits are dependent on wages, wages are *NOT* dependant on profits because profits are what are left *after* the wages.
I’m sure this is fairly basic arithmetic, it doesn’t need a degree to work out.
And all of that is nonsense as the variables are independent
Surely HMRC actually gets a bit more as a result of Facebook paying their staff generously?
Those high wages are being taxed at the higher rate of income tax, whereas paying the workers less and keeping the money as profit would mean those profits are taxed at the lower corporate tax rate?
Is there any way Facebook could be forced to pay their workers less, so there are more profits to be taxed at the lower rate and less high wages to be taxed at the higher rate?
That would be fair.
I’m sorry but this is not worth replying to
Actually this is a very good question. The rate of tax on income is much, much higher than that on corporate profits.
From a purely taxation standpoint it’s actually desirable for individuals to be paid more at the expense of profits.
And yet you dismiss this reasonable point out of hand. Why?
Because tax did not determine that outcome and nor should it so the question assumes a causality and motivation that is absent
The worker and comoany are independent agents here
Surely Facebook is a data company i.e. the thing of value is the data. The data is moved around and value added services derive value (advertising etc.).
As well as the accounting treatment we also need to acknowledge that the data is actually ‘our data’. We generate the data, comment on the data, look at the data but we don’t (today) individually get rewarded for the data.
You get paid for the use of your data by being able to use Facebook. You give The Zuk data and The Zuk gives you Facebook.
The alternative transaction model is to hand over actual folding money to Facebook to purchase the right to use Facebook.
As somebody pointed-out to me only yesterday, since Facebook and whatsapp amalgamated data anyone with a whatsapp account now shows in “people you may want to be friends with”.
In his case, since he uses online dating sites, it shows face pic, phone number and list of friends, where the online site only shows the alter-ego of the site user….doubtless more “advantages” of integration of data will become apparent…
Not sure i am following you on your comment about Facebook saled in the UK. My company sells to the USA. Are you saying I should file a Tax return in the USA because of this? I mentioned this to my accountant and he said it would be madness to base taxation of profits on where the customer was.
Not at all
And then s issue has been discussed so many times I can’t be bothered to do so again
And I agree with your accountant
Read up on unitary taxation