Facebook will pay no tax on $1.1 billion profit; gets refund instead

Facebook, the Internet giant with over 1 billion users, are going to pay no tax in the US, a report has revealed. Due to some nifty accounting, Facebook managed to pay no federal or state tax - in fact, they got a refund of $429 million. 

Citizens for Tax Justice, who research tax fraud, released a breakdown of how Facebook achieved this. What Facebook did was clever: because executive stock is tax deductible, Facebook issued a lot of it. In fact, they issued so much the deductibility ended up being higher than the taxes Facebook owed to both federal and state government. For this reason, the government ended up having to pay Facebook a refund on the tax they'd got from them in 2010 and 2011, which was roughly $429 million. 

On top of getting almost half a billion dollars from the government, Facebook is also carrying $2.17 billion forward for additional tax breaks in future years, essentially allowing them to complete the same manoeuvre every year. 

Of course, Facebook isn't the only company paying small amounts of tax. Companies such as Microsoft, Apple and Google are all under intense pressure to cough up the money they've avoided paying, especially in Europe where tax havens are used extensively to avoid taxation. 

In the fourth quarter of 2012, Facebook made $64 million in net income on $1.6 billion of revenue. 

Source: Citizens for Tax Justice, Gawker

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