Europe is going through a rather difficult economic period and talks have been abound regarding new taxes to be levied on multinationals. On the other hand, major multinationals have been finding newer ways to evade tax. A UK MP has now lambasted Facebook for having indulged in similar practices.
In the past, other tech giants and major corporations have also been accused of evading tax. And now, Facebook has been charged with the same. It would be important to note here that there are ways of evading tax which are perfectly legal and that’s how these companies attempt to pay a paltry sum to the tax authorities and get away with it.
During the year 2011, Facebook amassed a profit of $1.35 billion, operating from its Ireland facility. On this, the company paid a tax of only $4.7 million which is, indeed, ridiculously small. As a result of this, a Labour MP John Mann has termed Facebook’s tax practices as ‘immoral.’
To avoid paying higher taxes, many companies indulge in the ‘Double Irish’ con. This is a fairly legal strategy yet it is somewhat of a trick which lets companies get away with small tax sheets. In ‘Double Irish’, a company keeps writing royalties to another subsidiary which is also owned by it.
These payments are written off as business expenses, the result of which is that after a whole load of such transactions, a company is able to legally show that it barely made any profits even when it is making billions. And thus, it doesn’t have to pay much. In light of this, it is perfectly understandable why UK legislators want the corporate entities to cough up their rightful share of the taxes rather than evade them with tricks.
Source: The Guardian
Courtesy: The Verge
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