Facebook is giving out huge bonus payments to all of its U.K. employees in the near future, The Independent reported earlier this month. The share payouts total a whopping £280 million to be divided up among the 850 staff of its British operations, or an average of £775,000 (roughly $1.1 million) for each employee.
This enormous payout puts the social media giant on par with most major banks when it comes to lucrative bonuses; Goldman Sachs gave out an average bonus of £194,000 in 2015. Despite being one of the world’s top-listed companies, this news represents an enormous increase in the bonus pool for Facebook. The payments are to be given out to Facebook’s British workers in the next two years, between now and the end of 2018.
Why the seemingly generous million-dollar handouts? It turns out it may not be purely altruistic reasons.
— RT UK (@RTUKnews) March 4, 2016
As first reported by The Sunday Times, this latest initiative might actually be a scheme to sidestep the U.K.’s corporation tax, sometimes called the “Google tax.” Facebook has to pay off its own profits. Paying out £280 million by the end of 2018 and offering the sizable bonuses as a taxable expense could help Facebook drastically lower its tax bill over the next three years. The company has previously faced criticism for avoiding paying corporate taxes.
“Just last week, Facebook said it would revamp its tax structure in the name of more ‘transparency’ amid criticism it was avoiding taxes in the UK, agreeing to stop diverting sales through Ireland,” reported Newser.
The timing of these extraordinary bonuses would also seem to indicate an elaborate plan by Facebook to avoid paying its tax bill, as Russia Today reported.
“Days prior to this revelation, Facebook agreed to start paying the UK more tax on its British advertising sales. The profits had originally been funneled through the Republic of Ireland in an attempt to avoid UK corporation tax. Facebook now promises the revenue initiated in Britain will be taxed appropriately in the UK. Facebook paid out £35 million in stock awards to staff in 2014, resulting in them declaring a loss of £28.5 million. This allowed Facebook to pay the UK government a mere £4,327 in corporation tax despite it being one of their leading markets.”
Including wages, bonuses and other cash payments, Facebook’s U.K. staff took home £76.2 million last year after racking up £105 million in sales, handing out more than £35 million to its 362 staff, or an average of £96,000 for each member for the financial year 2014. Giving out this £35 million to its staff allowed them to claim a loss of £28.5 million.
As a result, Facebook only paid £4,327 in corporation tax in 2014, or less than the amount of tax paid by the average British worker, despite being one of the biggest companies in the world and its extensive profitable operations in the the country (the company records revenues of over £700 million in the U.K.)
This year, Facebook signed new agreements to pay the U.K. corporation tax of 20 percent on revenue instead of the lower 12.5 percent it would be taxed in Ireland. However, this announcement of the bonuses places doubt on whether the social media giant can be trusted in its tax dealings.
“These bonuses might be good news for some hard-working and talented Facebook employees. But it is bad news for the rest of us if it means getting even less tax out of the company – if that’s possible,” High Pay Centre director Stefan Stern said to RT.
Facebook is not the only company to take advantage of this tax loophole. Amazon and other large multinational corporations frequently take advantage of tax laws in a similar manner. Google has also been scrutinized for its tax methods, and after a years-long investigation recently agreed to back pay £130 million ($185 million) in back taxes to the U.K., according to The Verge, in a deal which was blasted by critics as being far too low.
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