This conflates a few things. As I'm an American, I'm going to speak about US tax law, but concept should be applicable. No normal US business is paying taxes on their _revenues_, they're paying taxes on their earnings (profit, roughly speaking). So if you made $1B in revenue selling $1 bills for $0.50, you'd have lost $500M and not have to pay taxes on top of that.
The point about fiddling with where revenue is accrued to impact tax rates is true, but the more accurate way to phrase it would be "FB paid only $X in taxes after record $XXX earnings in the UK". This isn't always as simple to derive, but you could back into an estimation of it by taking revenue from UK businesses and subtracting UK headcount and purchases made in the UK or from UK businesses. The tax number they'd owe is definitely higher (and there's a very strong argument that they should pay this rate), but it's not anywhere near "corporate tax rate * revenue in country" (or worse, global revenue).
You'd have lost $1B. You'd have to sell 2B $1 bills @ $0.50 to make $1B revenue.
UK corporation tax rate is 19%.
USA corporation tax rate is 21%. Pushed down partly due to low tax competition from the rest of the world, i.e. places like the UK.
Facebook pay little corporation tax in the UK because it isn't a British company. It's an American company. It was created in America. Most of its employees are there. Its headquarters are there.
The EU works the same way. Corporate taxes are levied where the company is headquartered. It's arbitrary but all other ways to try and divvy up something inherently multi-national are even more arbitrary.
I am British myself and I really don't understand why my fellow Brits have such a hard time understanding this - foreign companies pay little UK tax on profits because they are foreign. They were not made in Britain. If Facebook had been formed in the UK then for sure, most of its corporation tax would be paid to the Exchequer. But unfortunately it wasn't.
1) If you pay tax where you do business do you pay tax on global profits there? For example, France’s new law taxes 3% of global revenue if you do more than €28m in business in the country. Should it be taxed on 3% of global revenue or on the exact amount of business it does in France?
2) If BMW sells a car in the US, do we tax BMW global for doing business in the US at the 21% tax rate?
“ The levy designed by Spain included a tax rate of 3%, which would be applied to certain digital services from tech giants whose global revenues exceed €750 million and whose earnings in Spain are greater than €3 million.”
So let’s say the US goes back to Europe and says ok Europe, all of your best industries/companies face a 3% tax if you do more than a million dollars worth of business. How would those companies react? Think they might press their governments to do something about it?
I’m not a fan of tax-avoidance or anything, but I hardly think this proposed solution is fair, or won’t elicit a significant response from the US. It’s protectionism - so call it that and make sure you are railing against the internet about it like you do when Trump does random tariffs.
Spain doesn’t export a lot to the US maybe? Ok then the US can just pick and choose Eurozone members to arbitrarily tax. That’s what I’d do. 15% tax on global revenue for European cars sold in the US. Why not?
Aren't there import tariffs and sales tax in US?
There's VAT, which is essentially passed through to their customers but the seller collects it.
There's employment, local government taxes. Facebook pays those because it has workers in the country.
There's corporation taxes, which are taxes on corporate profits. Facebook pays some of these because technically speaking there is no one company called just "Facebook", there's Facebook Inc (USA), Facebook Ltd (UK) etc and they buy/sell services from one another. Specifically, Facebook USA buys software development and sales services from Facebook UK, and Facebook UK buys the rights to the name and the ability to insert ads into the ads system from Facebook USA. We think of them as a single firm but legally they aren't, and this follows from the lack of one global government so it's not a small quirk or weird legal hack Facebook are engaged in: there is literally no such thing as a company of the world.
To what extent corporate profits are allocated to specific countries determines what amount of corporation tax is paid, however, all such allocations are entirely arbitrary. None can be said to be more rigorous or accurate than any others, although tax lawyers make a lot of money out of trying :)
For instance, all of these positions could be reasonably argued:
1. Facebook makes zero profit in the UK and thus should pay no corporation taxes at all. That's because Facebook makes money due to the actions and software written by the employees in the USA; without the UK office Facebook would still exist but without the USA office it wouldn't. Therefore all money is "made" in the USA and none is "made" in the UK.
2. Facebook makes lots of profit in the UK because if every British person stopped using Facebook tomorrow, it'd punch a big hole in their revenue stream. The incremental costs of serving a British customer over an American customer is tiny because they even speak the same language, so once the US version of the site was developed, the costs were already sunk. Thus all revenue from British users is pure profit and so 19% of all revenue originating from British firms should accrue to the UK government.
3. Facebook doesn't make any money in the UK, it actually makes its money in the Ireland because that's where its EU registered headquarters is, and EU corporate tax law was designed to allocate profits to the nameplate location.
4. Facebook makes its money in Ireland because that's where the datacenters are. This is the critical aspect because it's ads are sold in real time auctions and thus the location where the click is processed is where the "sale" is being made.
Of course this is circular: in argument 2 we talked about "British firms" but what is a British firm? Is ARM? It's owned by the Japanese now. Maybe it's a Japanese firm. Or maybe it's still British because that's where most of the work is done.
Because the concept of "making money" for an international firm is so vague, and impossible to refine in a principled way, in practice what happens is a bunch of well paid corporate tax lawyers sit down with the government tax agencies and thrash out some sort of ad hoc deal or arrangement. The company agrees to pay some tax to the UK even though they may feel entirely American and in return the government agrees not to go to court and fight a very complex and expensive tax case that they might well lose, depending on the whims of the judge and/or how vague the various tax treaties are written.
> All countries tax income earned by multinational corporations within their borders. The United States also imposes a minimum tax on the income US-based multinationals earn in low-tax foreign countries, with a credit for 80 percent of foreign income taxes they’ve paid. Most other countries exempt most foreign-source income of their multinationals.
https://www.taxpolicycenter.org/briefing-book/how-does-curre...
Facebook customers in Europe pay Facebook Ireland, who are subject to 12.5% corporation tax. Facebook Ireland in turn pays "licensing" fees to Facebook Cayman Islands, where there is no corporation tax and high bank secrecy.
Remember the Vodafone tax scandal? You might think that as a predominantly British company (spinoff of Racal in the 80s) listed in the uk, they ought to pay tax on the UK profits. Instead most of the profits appear in Luxembourg.