Facebook makes a lot of money. $1.1 billion in profit last year to be precise. An impressive amount frankly, given that their 700 million+ membership doesn’t pay a dime.
That fabulous revenue gets put to some questionable uses: they pay their interns more money per month than any 20-something would know what to do with. But let’s not attack them for being generous, especially when so many other companies don’t seem to value their interns at all.
No, if Facebook deserves one eyebrow raised at its finances, it should be over how much money they don’t pay when it comes to taxes. Recently it has been reported that last year, Facebook paid no net corporate income taxes in the United States.
Facebook saved $3.2 billion in taxes by taking advantage of the tax deductibility of executive stock options thanks to their IPO from last year. They could even get a $429 million refund. There’s nothing illegal about it, either—it’s just some genius accounting.
This tax shelter is legal, yes, but it’s up in the air as to whether it’s ethical or not. Facebook certainly isn’t the only major company that has succeeded in escaping a tax bill. General Electric didn’t pay any U.S. taxes in 2010, and claimed a benefit of $3.2 billion. Starbucks’s tax status has been less than straight-forward, too.
It sure is one way for multi-billion dollar companies to save a few more millions or billions. If only us five-figure a year suckers could figure out how to do the same.
Boycotting against companies that find these loopholes is usually the first response, but the trouble is that these companies aren’t doing anything illegal. They’re obeying rules written by the governments they’re flourishing under. The real problem might not be that massive corporations are taking advantage of profitable tax exceptions, but that the exceptions exist in the first place. Companies might have to take some care in their reputation, but the bottom line is far more important. (Why else would we all be buying iPhones by the bucket when the cost is actually so much higher?)
If people were outraged over companies finding legal tax havens, they’d apply pressure on their governments to tighten the noose around what they can and can’t do. Threatening to never buy another lukewarm Pumpkin Spice Latte from a bored barista who can’t spell your name won’t actually do much.
Frankly, if regular citizens were offered the same loopholes, we’d probably take it. Who doesn’t want a little more pocket change? And when that pocket change is $429 million?
Teach us your secrets, Facebook. Spring is coming, and mama needs a few hundred new pairs of shoes.
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