How Did Facebook Manage Such a Tiny UK Tax Bill? With Very Big Bonuses
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How Did Facebook Manage Such a Tiny UK Tax Bill? With Very Big Bonuses

No "Double Irish" maneuver necessary.

Facebook is under fire in the United Kingdom over its vanishingly low corporate tax bill after London press reports revealed that the social media giant paid less in taxes last year than the average British worker.

The social media colossus paid a paltry £4,327 ($6,642) in UK taxes, despite booking £105 million ($161 million) in 2014 revenue, according to The Guardian.

London's feisty press seized on the report Monday, with the Daily Mail slamming the $266 billion tech titan in a typically sensational front page headline: "Facebook Insult To Taxpayers."

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The average British worker pays about £5,000 ($7,675) in annual UK income taxes, according to the tabloid.

"This is yet another example of a billion dollar company that makes significant profits in the UK yet somehow fails to pay any meaningful tax on them," Warwick Business School accounting professor Crawford Spence said in an email.

The reason for Facebook's tiny tax bill is that the company reported a UK accounting loss of £28.5 million ($43.7 million) last year, thanks in large part to the £35.4 million ($54.3 million) in stock grants the company awarded to its 362 London-based employees, who made an average of £210,000 ($322,000) in pay and bonuses last year, according to The Guardian.

The furor over Facebook's miniscule UK tax bill comes as regulators in the European Union and elsewhere are weighing tough new measures aimed at cracking down on corporate tax avoidance strategies, including the notorious "Double Irish" maneuver, which is being phased out by the Irish government. (Facebook's first international headquarters opened in Dublin in 2009, but the company is based in Delaware.)

Last week, the Organization for Economic Cooperation and Development issued a package of proposed rules designed to close "gaps in existing international rules that allow corporate profits to 'disappear' or be artificially shifted to low/no tax environments."

Facebook did not immediately respond to a request for comment, but a company spokesperson told The Guardian that the social media giant is "compliant with UK tax law."

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"Internationally, there are just far too many loopholes and complex arrangements available to corporations."

Facebook's puny UK tax bill has been the subject of controversy before. In 2012, the company was accused of "deliberate manipulation" after reports revealed that it paid zero—nada—in UK corporate taxes.

Spence agreed that Facebook's tax minimization appears to be legal under UK law, and said that the burden is on lawmakers and regulators to crack down on corporate tax avoidance strategies.

The Public Accounts Committee (PAC), the British parliamentary committee that oversees how the UK government manages public finances, is planning to examine Facebook's tax avoidance strategies, according to City A.M., a London business newspaper.

"We are keen to ensure every large corporation pays its fair share of tax and abides by the spirit, not just the letter, of the law," Meg Hillier, the MP for Hackney South and Shoreditch, who leads the PAC, told the newspaper.

Corporate tax avoidance has become an increasingly controversial issue on both sides of the Atlantic amid a growing backlash against rising levels of income inequality.

Dozens of the largest of multinational corporate giants—including Apple, Google and Microsoft—route profits through subsidiaries in Ireland, the Netherlands, and the Caribbean in an effort to minimize their tax bills.

"Internationally, there are just far too many loopholes and complex arrangements available to corporations," said Spence.

In the United States, Democratic presidential candidate Bernie Sanders has made corporate tax avoidance a key part of his populist campaign platform. Sanders has demanded that corporate giants "pay their fair share in taxes."

The 500 largest US companies are holding more than $2.1 trillion overseas, allowing them to avoid paying an estimated $620 billion in US taxes, according to a report published last week by the Center for Tax Justice and the US Public Interest Research Group Education Fund.