4th March 2016
Facebook’s decision to rearrange its tax structure to pay more corporation tax shows just how out-dated the system has become, according to the TaxPayers’ Alliance (TPA).
The organisation argued that corporation tax has ‘lost all credibility’ and needs to be replaced by a single, straightforward alternative.
The news comes after it was announced that Facebook will pay millions of pounds more in tax in the UK. The social media company overhauled its tax structure following criticism that it has been avoiding tax.
According to the BBC, the profits from the majority of Facebook’s advertising initiated in Britain will now be taxed here and it will no longer route its sales through Ireland.
Jonathan Isaby, chief executive of the TaxPayers’ Alliance, said the fact Facebook has changed its structure voluntarily to pay more corporation tax ‘just goes to show how absurd the system has become’.
‘The outdated tax system is simply not suitable for the modern, global economy and leaves the tax liabilities of multinationals open to honest dispute,’ he said.
‘Instead of announcing another round of ineffectual ‘clampdowns’ at the Budget, the chancellor should rethink corporation tax in it’s entirety.’
The TPA has also released a briefing note on reforming corporation tax.
Isaby said it had ‘lost all credibility and needs to be replaced by a simple and workable alternative’.
‘Successive governments have responded to the challenge of modernising our tax code by tinkering around the edges and adding more legislation to the system, which has only made matters worse,’ he said.
‘It’s high time the government introduced radical changes to the system and getting rid of the discredited corporation tax would be a good place to start.’
The criticisms the TPA have of corporate tax is that it is ‘inherently opaque’ and its complexity ‘undermines the legitimacy of the system’.
It also said the ‘subsequent controversy and confusion leads many to believe that large companies are engaged in greater tax avoidance than actually take place’.
The TPA said the burden of corporation tax fall mainly on employees through lower wages.
Finally it said profits are tricky to locate and therefore represents a burden for HMRC.