Two cheers for Facebook’s concession to HMRC

So much for the “Double Irish”. Facebook has promised it will no longer reroute profits made in the UK to Ireland, where they are taxed at a nominal rate, but will pay a more appropriate amount into the coffers of HMRC. The company has admitted what almost everyone else could see: it is absurd for a firm that made £2.5bn in global profits last year to pay, in one of its biggest markets, less tax than an individual worker on the average salary (at a sum total of £4,327).

We say “almost everyone” deliberately. Any pleasure at the announcement is tempered by the fact that, earlier in the week, HMRC made it clear that it saw nothing wrong with the Double Irish, or any of the other multinational tax-avoidance schemes. “It is simply the way that corporation tax works,” a policy paper explained.

The victory here is a result of public pressure. Campaigners deserve credit. But, as we report, it will take years before Facebook actually pays any additional tax. And even then relying on giant tech firms to voluntarily change their corporation structures so that they pay more tax leaves a great deal to be desired. The Government’s tax-collecting body should be leading the charge for reform that compels companies to have profits taxed where they are made, not in a convenient shelter.

There is, otherwise, a risk that tax will become simply a weapon in a company’s PR arsenal, with gestures made whenever the heat becomes intolerable. Facebook has no doubt acted wisely. The company shows signs of adopting a less flagrantly dismissive appreciation of the link between the state and private enterprise. (Mark Zuckerberg does not need to send internet-disseminating balloons into the skies above the Midlands, for example.) We can hope that more multinationals follow its example. But HMRC ought to endeavour not to leave that as our only option.