Facebook is facing serious questions over its tax arrangements after it was revealed it only paid £2.9 million (US$4.2 million) tax on its £840 million (US$1.1 billion) profits generated outside the United States last year.
All of the social networking giant’s profits outside of the US are channelled through Ireland and advertisers from Africa and the rest of the world must pay Facebook Ireland when paying for space, reported the Guardian.
The loophole was exploited by using an accounting technique called the ‘Double Irish’ which allowed the company to move £750 million to the Cayman Islands and its Californian parent company in licensing and royalty payments.
After the transfers, Facebook Ireland then reported a £15 million loss despite reporting revenues of almost £2 billion.
A Facebook spokesperson said: “Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation.”
Facebook Ireland employs 287 staff, meaning their 2011 gross profits amount to £3.1 million per employee.