Facebook's Mark Zuckerberg and his wife Priscilla Chan this week created a stir when they were reported to have pledged to give away 99% of their shares in the company — worth according to themselves $45bn — to good causes, when they announced the birth of their daughter Max (Maxima). Amidst all the bad news this good news got a lot of attention and it may seem churlish to undermine it. However, the truth is that the Facebook founder effectively pays no income tax and the shares are not being given to a charity.

 

In a letter to Max, the proud parents said:

Our hopes for your generation focus on two ideas: advancing human potential and promoting equality.

The word 'charity' does appear once in the letter but this is in the context of sweeping aspirations on creating a better world:

Our society must do this not only for justice or charity, but for the greatness of human progress. Today we are robbed of the potential so many have to offer. The only way to achieve our full potential is to channel the talents, ideas and contributions of every person in the world.

Mark Zuckerberg wrote in 2013:

For nine years, we've been on a mission to connect the world. We now connect more than 1 billion people, but to connect the next 5 billion we must solve a much bigger problem: the vast majority of people don't have access to the internet.

Zuckerberg's aspirations are business goals as a political leader's are part of an election program.

Jesse Drucker, of Bloomberg News who first broke the story on Google's Double Irish tax dodge in 2010, is the lead author of a story today that the Zuckerberg's global goals will be handled by a limited liability company.

The vehicle can donate to charity, but it doesn’t have to give away some every year, as a foundation would. It can also make investments and participate in “policy debates.” That means it could turn a profit and make donations to political candidates and pay lobbyists. “This is not a charitable foundation,” said Victor Fleischer, a tax law professor at the University of San Diego. What they’ve done “is essentially nothing more than a promise to give some money to charity in the future. But the structure somewhat resembles a family office, used both for investment and charitable purposes. The level of activities in the charitable versus investment and political pieces isn’t specified."

Mark Zuckerberg is paid a salary of $1 by Facebook and in 2012 and 2013 raised about $3.4bn from selling Facebook shares — he does not have to pay any capital gains tax on the remaining shares as long as they are not sold.

Facebook books about half its global revenues in Ireland and in 2014 reported in its consolidated accounts an effective tax rate of 40% — "due to non-deductible share-based compensation, operations in jurisdictions with tax rates lower than the US, and tax research credits. Our effective tax rate decreased primarily due to a change in our geographic mix of pre-tax income."

The level of 40% is a fiction as were rates quoted by Apple and Pfizer in their regulatory filings.

Pfizer and Apple's effective tax rates misleading fictions

Just as Pfizer manufactured losses in the US in the past five years, Facebook UK reported a pre-tax loss of £28.5m last year, but the firm also paid its 362 UK staff a total of £35.4m in share bonuses.

Facebook paid just £4,327 ($6,643) in UK corporation tax in 2014 — the BBC reported an average UK salary is £26,500 on which employees pay a total of £5,392.80 in income tax and national insurance contributions.