In these times of financial woe, people love to complain about all the big, nasty, faceless companies avoiding paying tax. They inevitably moan about it on Facebook, Google and Twitter (and sometimes even do something about it in the real, physical, world). But what about those companies themselves? The Web 2.0 behemoths are now some of the largest companies in the world, and they’ve decided – just like the evil old companies – that they don’t like paying all that tax. Don’t be evil… and don’t pay any tax if you can help it. But how do they do it?

The Numbers

An Irish Times newspaper article caught my eye the other day. It discusses the rapid growth of Facebook’s Dublin operation in 2010, whose accounts have just been published (as they must be by law, despite FB’s apparent reluctance). The headline figure is that:

[Revenue] is up from €15.2 million to €229.1 million

That’s a pretty significant increase! But that’s only revenue, how much of it was left over as profit?

Facebook Ireland generated a pretax profit of €1.9 million

What?! Where did the other €227 million go?

According to the article it mostly disappeared into a mysterious black hole known as “administrative expenses”:

Administrative expenses increased … to €221.6 million as a result of … royalties paid to other Facebook entities for services provided during the year.

How do they do that?

Is it me or does that sound suspicious? Well, it should do, because it is.

It turns out that Ireland’s significantly lower rate of corporation tax (12% vs 26% in the UK, and one of the lowest in the world) isn’t the only reason why companies like Facebook, Google et al move there. There’s also the very useful fact that, unlike most developed economies, Ireland chose not to introduce any legislation to prevent companies siphoning off their revenue to low-or-no-tax regimes like the Cayman islands or Bermuda.

So that’s where the “missing” €221 million has ended up: it’s been paid from the Irish part of the business to the tax-haven subsidiary, leaving only a small amount subject to corporation tax in Ireland. This practise is known in tax circles as the “double Irish”, and it (along with its Dutch equivalent) seems to be fairly widely used and well understood, even having its own wikipedia entry. Of course Facebook now funnels as much as possible of the revenue from the UK (its second biggest market) through the Ireland operation to get the most out of this arrangement. That explains the large increase in the numbers since last year.

There are many high-profile tech companies that have Dublin operations and may be avoiding tax in this way, including:

• Facebook
• Twitter
• LinkedIn
• Google
• Microsoft
• Oracle

That’s quite a roll call.

The Result

The result of all these shenanigans for Facebook? It pays a ridiculously small effective tax rate of less than 1%, even better than Google’s 2.4% rate. And given Ireland’s current economic state I can’t imagine their government will be introducing more restrictive tax legislation any time soon in an attempt to crack down on it. They can’t risk these big companies abandoning their new homes in Dublin’s Silicon Dock.

Of course, you should feel free to ‘like’ this blog post on Facebook, after all, what will it cost you?

(* Disclaimer: These are solely my opinions, not those of my employer or anyone else).

But what they seem to have missed is that something very different, but equally significant, has replaced it: the instantaneously-shared TV experience, enabled by Twitter. With the omnipresence of laptops, broadband and Twitter, the sofa’s now connected. It’s possible to sit at home on your own and discuss, berate and dissect whatever’s on RIGHT NOW.

Most of us have experienced shared TV viewing at some point in our lives. People my age would’ve probably sat in the living room with their parents, before every kid over the age of 6 got a TV in their bedrooms. Shared living, like student accommodation, is also a common way to experience it. As we get older our social circle tends to shrink, and television watching can become a more isolated affair.

Of course, the “old” ways of discussing TV still exist; we still enjoy vitriolic printed reviews in books, newspapers and magazines, we can still call someone and discuss a program over the phone. But these off-line methods are bandwidth-limited (we can only call one person at a time), slow (with a lead time of days or weeks for printed media) or uni-directional. Fundamentally, they lack immediacy.

In contrast Twitter enables us to connect with lots of people simultaneously; lots of people who are all sharing the same TV experience. It’s like having a load of sarcastic, funny mates in your living room. Ones that you can get rid off just by closing a laptop lid.

I’ve identified 5 major groups of TV twitters:

Schedulers
These helpful individuals post tweets about things they find interesting and are intending to watch themselves, normally along the lines of:
Guy Richie's Revolver is starting now on Channel 5 - the most confusing film I've ever seen!

The usefulness depends on the type of people you follow and on where in the world they are. @aplusk and @courtneylover79 are not going to be posting much about what’s on BBC 1 on a Sunday evening.

Crowds
This accounts for the vast majority of people twittering about telly. They tend to congregate around large “event” programmes, Eurovision, Derren Brown, X-Factor etc, or geek-oriented watching such as Charlie Brookers recent (and excellent) Gameswipe. Of course any reality-TV type programme presents significant opportunities for Twitter-enabled sniping. We all know how much the internet loves this kind of “look at that!”, “lolwut”, “OMG!”, “loozer” stuff, but it’s often combined with genuinely funny material too.

Hangers-on
This groups consists mostly of spammers, and people outside of the country where the program is being broadcast. They spot trending hashtags and either piggyback whatever they’re selling onto it, or tweet something along the lines of “What the hell is #nnn…?”. They don’t add much. Enough about them.

Celebrity Friends
If you follow celebrities* – and lets be honest, who doesn’t? – the chances are they have some friends. And celebrities friends are quite often celebrities themselves (keep it in the family, eh?) so you’ll often see tweets like:
my friend on bbc2 newsnight right now! go sister!


Try to contain your excitement. Unless it’s you of course, and then you’re welcome to tweet OMG!1!! I'm on TELLY!!
(* of course, by celebrity I mean anyone with more than 500 followers).

Commentators
Some twitterers take it upon themselves to provide blow-by-blow, often eloquent and vaguely fantastical coverage of certain programmes. This can feel like having someone on LSD on the sofa next to you whispering in your ear. So probably not for those of a sensitive disposition.
Gregg keeps saying "I would happily eat that." To be fair, he would happily eat an old Big Mac out of a tramp's shoe.

This type of companionship can brighten even the most mundane viewing. It tends to be the product of “resting” writers or comedians, writer\comedians, or comedian\writers.

Will TV ever be the same again? For me it won’t.

(The @names have been changed to protect the innocent. Well, some of them…)

I’ve added a widget to the sidebar to give you a flavour.