“This Government must wake up to the scale of the corporate tax abuse scandal in the United Kingdom”, said Mr McDonnell.
“Pretending that an entity like Facebook UK is operating independently from the rest of Facebook, maximising UK profit on its own, is absurd”.
The BBC reported that among its major clients in the UK, Facebook account Tesco stores and supermarkets Sainsbury’s, but the food giant Unilever and WPP advertising group.
As part of this, Facebook will also pay a higher rate of corporation tax based upon the profits that it makes within the UK.
The changes to how they book their ad sales, which will still see smaller sales funnelled through Ireland, will take effect from April, and will begin to show on their 2017 tax bill. Under the agreement, Google is committed to pay the Treasury Â£ 130 million in back taxes for the period 2005 to 2015 ($ 247 million).
The social network giant was the subject of controversy previous year when it was revealed that it paid just Â£4,327 in corporation tax in 2014.
Globally, the company makes more than Â£1bn of profit every three months.
Within a short time, all giant businesses operating in the UK will be dealing with Facebook UK, not Facebook Ireland.
Income from some of its largest advertisers will now be taxed in the United Kingdom after the company announced stopping routing profits through Ireland.
Facebook executives will be told about the changes this morning.
In future, Facebook will report its United Kingdom sales in Britain.
“In light of changes to tax law in the United Kingdom, we felt this change would provide transparency to Facebook’s operations in the UK”.
There was no guidance from Facebook on how much additional revenue from advertisers can be expected to be routed through the United Kingdom or how much more tax the company will pay to HM Revenue & Customs as a result of the move. The company is now building a new headquarters in London, while the United Kingdom contributes to some of its most ambitious projects, including its solar-powered drone development.
Facebook has now said that those staff are doing “value-added” work, a key issue in the setting of tax rates.
“What this means in practice is that UK sales made directly by our UK team will be booked in the UK, not Ireland”.
That is a similar structure to Google UK, which is paid by its USA parent firm for operations in Britain.
“They choose how to structure their tax affairs and must acknowledge responsibility for those choices”, said Ms Hillier. “HMRC should not just give Facebook a wrap over the knuckles over this”.
Facebook moved to change its relationship status with the British tax authorities Friday.