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Facebook to take 10-year tax holiday?
Facebook has managed to amass a tax credit worth $13.4bn off the back of its stock market flotation last year, and could pass on paying US corporation tax for a decade. Will Zuckerberg risk the bad press?
Facebook’s tax obligations are back in the news of late after it emerged that the world’s largest social network may be able to get out of paying any corporation tax in the US for years to come.
It turns out that under US accounting rules, Facebook is allowed to count any profit made by its employees on its stock option schemes as a tax deductible expense. Even though it cost the company nothing to hand out the options. And given that thousands of Facebook staff and early investors cashed in as soon as the deadline was up in August, Facebook has now booked a $13.4bn (£8.5bn) credit that can be used to offset any future tax bills.
Of course, shareholders only decided to run for the hills because, at that point, Facebook had already lost half of its market value in the few short months since its May flotation, trading at $20 per share, almost half of its original $38 per share value. At the time, the move seemed like a pretty sad indictment of Facebook and the share price sank even lower, the market awash with big blue shares.
But it looks like Zuckerberg has had the last laugh. Facebook could potentially avoid corporation tax back in the US for up to 10 years, according to tax experts. The question is, will this have a further negative effect on Facebook’s reputation, which has already been sullied by allegations of overzealous tax avoidance?
Between the tax rows, and the sudden influx of ads and sponsored posts on the network, does Facebook
run the risk of pushing its loyal users too far? Post your thoughts to our, ahem, Facebook page.