Monday, 12 October 2015

Facebook £4327 Tax and You: Why You Should "Like" This.

£4,327. That is not a lot of money for one of the richest internet companies to pay in tax, especially when they paid out over £35 million pounds in bonuses. The UK tax department must feel as though they are being slapped in the face. There will be investigations and audits and the public will go wild. Everybody will be asking how can Facebook get away with it? However, the smart people will be asking how can I do the same thing?

Right off the bat I want to tell you that I am not against paying tax. I just don't want to pay any more than I should. Tax is vital for any society to run. It pays for roads, hospitals, police, schools and defense, just to name a few. I think everybody should pay tax. I just want to pay less.

Facebook doesn’t want to pay tax either. That is why they only paid £4327 in tax in the UK. In order to pay such a low amount of tax Facebook had to do a few things. Some of those things may not be what is considered ethical, but they are legal.
Terry Shadwell
I "like" the way Facebook reduced their tax

First, for Facebook to pay such a low tax rate, they needed to be a company. The UK, like many countries, have a lower tax rate for companies than it does for individuals. The current rate of tax for a company in the UK is 24%, irrespective of how much money the business makes. That is a lot different to the 45% tax rate for the top money earns in the UK.

So if you put that into perspective, if Facebook was to earn £1,000,000 in a financial year, they would pay £240,000 in tax, before any expenses are taken out. If an individual was to earn £1,000,000, they would pay £450,000 in tax, almost half. So you can see straight away that businesses pay less tax than individuals.

The reason business pay less tax is because they employ people. To help a company, like Facebook, employ more people and to keep the economy going, they are given tax breaks. This is like a thank you from the government.

Another reason why Facebook can pay so little tax is because they are are able to take out their expenses before they pay tax. That means that when a business earns money (gross profit), they pay for all their business expenses, such as payroll, electricity, water, and everything else that it takes to run a business, then they pay tax on what is left over at the end (net profit). By only paying tax on what is left over, the amount being paid in tax can be a lot less.

If we again look at Facebook earning a million pounds in a year, out of their earning they may have to pay over £500,000 in expenses. that only leaves them £500,000 net profit. They then pay tax on that amount, which is £120,000.

The benefit for any business is you can legitimately claim a lot expenses before you pay tax. Facebook are not the only business around the world to work the system. Again, they are given these tax breaks due to the fact that they employ people and keep the economy going.

If we compare that to an individual earn £1,000,000. The individual pays tax first, then pays for any expenses from the money that they have left. Again, the business comes out in front.

Of course, Facebook did not get to pay such low tax simply because they are a company and get tax breaks. They, like most big companies, rort the system by moving money around from country to country. This may not be the most ethical thing in the world, but it is legal.

Two countries with low tax rates are Hong Kong (15%) and Singapore (17%). By setting up a company in one of these countries business can move money from the UK, or any other country, legitimately and avoid paying higher tax in the original country. This is how many businesses do it.

This is just some of the practices that business, like Facebook, are undertaking. And I love it!

What is great about all of this is you can do it too. You can run a company and do exactly the same thing. In fact, at this very moment, I am researching how to get my own business operating the same way, legally.

Terry Shadwell
Stop paying to much tax!
If you want to pay less tax and have more money you need to start a company. It can be complicated and you need to hire experts to help you, but it will be worth it. You can then pay company tax rates, after your expenses and money your money around to other countries where you pay less tax.

You see you can either complain about the system, which will never change no matter what the politicians say, or you can join them. I opt to join them.

I want you to understand a few thing however. There is a difference between tax reduction and tax avoidance. Tax reduction is legitimately reducing the amount of tax you pay. Tax avoidance is about trying not to pay tax at any cost. One is legal, the other gets you sent to gaol. Ask Wesley Snipes about tax avoidance and goal. He did three years in prison for tax avoidance.

So make your choice. You can complain about Facebook, or you can “like” them for what they have done and copy them.


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