Facebook's UK Tax Rate Slammed As 'Unethical'

Facebook's UK business paid just £238,300 in corporation tax last year, accounts have revealed, in a move described as "unethical" by campaigners.

The world's biggest social networking website declared a turnover of £20.4m in the UK?for 2011 - up from £13m the year before - but analysts say its actual earnings are much higher.

Media research firm Ender Analysis estimates that sales were more likely to be around £175m last year, as advertisers continue to flock to the company.

Accountant Richard Murphy, who founded the Tax Justice Network, said Facebook is the latest US technology company to abuse the UK's tax system.

"They are shifting their income to low-tax countries such Ireland, but dumping costs in the UK to make sure they pay as little tax as possible," he said.

"Facebook is only declaring a fraction of the UK sales we expect it is making.

"Is it legal? Yes. But it is unethical because they are deliberately free-riding the system."

High wage costs meant Facebook actually recorded a pre-tax loss of £13.9m in its annual accounts published by Companies House.

Its total bill for staff costs and wages was more than triple the previous year's at £24.8 million, which - as it only employs 90 people in the UK - is equivalent to more than £275,000 per employee.

These costs include a £15.4m "share-based payment charge" which is believed to cover employees' income tax and national insurance on shares they received before the company's stock market flotation in May.

Mr Murphy said the time had come for a Europe-wide review of the practice with the aim of ensuring tax is paid in the country it is earned.

Treasury Committee member John Mann MP said technology companies benefit from the UK's internet infrastructure but do not pay tax to fund it.

"There should be an internet tax on internet companies - in the same way that cars have a road tax," he told Sky News.

Facebook was listed on New York's Nasdaq in May, and its shares have lost around 50% of their value since.

But its popularity keeps growing, and earlier this month founder Mark Zuckerberg announced the website now has more than one billion users across the world.

Following the publication of its accounts, Facebook said: "As is normal for an organisation operating in dozens of countries around the world, we regularly file reports about local operations.

"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."