Facebook tax row will generate more heat than light - The City View

City A.M.
Follow City
Labour MP David Lammy slammed the company as a “disgrace” (Source: Getty)

Here we go again. Corporation-bashing is back in full force, this time targeted at Facebook following the revelation of its latest UK tax bill.

Labour MP David Lammy slammed the company as a “disgrace” yesterday, while Green party leader Natalie Bennett described Facebook – which employs hundreds of people in the UK and is enjoyed by millions of Brits – as a “parasite”.

With MPs on the Public Accounts Committee hungry for a piece of the action, this episode threatens to generate more heat than light. Politicians are vying to stir up public anger against that easiest of targets – the multinational corporation – while the root causes of the situation go relatively undiscussed.

The effort expended on this circus would be better focused on a debate surrounding the OECD’s recent recommendations over corporation tax. Will the international body’s suggestions sufficiently reform the system, or merely paper over the cracks?

Indeed, is it even logical to maintain a clunky nation-by-nation tax on profits, when so many companies operate in complex ways across numerous states?

The row over the amount of corporation tax that tech giants (such as Facebook, as well as Google and Amazon) pay in certain countries is itself borne of governments’ failure to keep up with the modern world, where many firms do not have simple bricks-and-mortar assets located neatly within a set national border.

Commerce is increasingly cross-border, especially online, even when it comes to companies’ internal operations. Corporation tax may seem like a good idea at first, by making big companies foot the bill for public services. 

But like all taxes it’s ultimately paid by people, not by “a company”. The cost is shouldered, to varying degrees, by staff, customers, and shareholders.

If there is a desire to bolster the state coffers, would it not be far more honest, transparent, and effective to decide how much extra certain groups of people should pay, and then to hike their taxes directly?

Corporation tax is popular with governments because it’s a relatively convenient way of pulling in a few more bob.

Ultimately, however, it represents a flawed system. Instead of rushing to condemn law-abiding companies, politicians should recognise these flaws and consider some bold remedies.

Related articles