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Margaret Hodge MP: Facebook guilty of "deliberate manipulation" with £0 tax bill

Margaret Hodge, the chair of the public accounts committee, has accused Facebook of "deliberate manipulation" after it emerged that the company's UK tax bill dropped to zero last year. The tax drop came in a year that Facebook posted a 70 per cent rise in UK income.

Hodge accused the company of trying to "deprive the British taxpayer of a rightful tax contribution".

Facebook paid £238,000 tax in 2011, but nothing in 2012. The company accounts for almost 5 per cent of all the £6 billion spent on digital advertising in the UK last year. Compared to rival Google's 44 per cent share, this might not seem much, but Google paid £12 million in corporation tax last year, a figure that was criticised for being shamefully low. But the reality is that with a share only 8.8 times that of Facebook, Google paid over 50 times more tax.

Facebook processes its UK sales in Ireland, which allows the company to pay a lower rate of tax. Facebook has paid only £1 million in corporation tax since the opening of its London office in 2007.

"Facebook pays all taxes required by UK law and we comply with tax laws in all countries where we operate," said a spokesman in response to the accusations. "We take our tax obligations seriously, and work closely with national tax authorities around the world to ensure compliance with local law."

France is currently pushing for Europe to adopt a new corporation tax regime, one that would see multinationals such as Google and Facebook regulated and taxed in the countries where customers use their websites.

The new legislation would ensure that companies were taxed according to where revenues are generated, rather than simply where they are collected. This would avoid abuses of the kind discovered at Google, where their UK office was designated a primarily marketing operation, which made it ineligible for corporation tax.

Hodge offered a blistering reprimand of Facebook, and urged those above her to take some kind of action.

"I am getting fed up of this constant stream of stories," she said, before saying that there has been "little sign of a challenge from HMRC and a strange silence from Government."

Facebook chief operating officer Sheryl Sandberg is a known associate of Chancellor George Osborne. The chancellor hosted a party for the launch of her book, Lean In, when it was released earlier this year.

Executives from Google, Amazon and Starbucks have all faced Hodge's committee on charges of tax avoidance.

Facebook has over 24 million daily users in the UK alone.

Image: Flickr (Institute for Government)