Will UK’s HMRC Now Target eBay & Netflix?

Will UK’s HMRC Now Target eBay & Netflix?

According to statistics compiled by the UK’s Companies House, American tech companies eBay and Netflix paid only about £1.9 million in taxes on a combined revenue of more than £1.3 billion in 2016.

As reported by The Telegraph, “eBay paid just £1.6m in tax on £7.6m in profits in 2016,” while Netflix “halved its UK tax bill to below €300,000 on around €1m in profits.”

Despite reporting $1.3 billion in UK revenues to US tax authorities, eBay’s UK office claims its revenue in the country is primarily comprised of marketing and advertisement responsibilities for its Switzerland-based parent company.

According to Belfast’s Telegraph, the American company’s UK branch “runs as a wholly-owned subsidiary of eBay International – which is incorporated in Switzerland – and according to its accounts, saw part of its revenues generated from the parent company.”

eBay UK

Furthermore, eBay UK claims its main operation in the country is to “provide services to eBay International AG by recommending market penetration for the UK internet marketplace and related third party advertising sales in the UK, Germany, France, Italy, Belgium and Australia.”

Following this disclosure, an eBay spokesperson said, “In all countries and at all times, Ebay is fully compliant with national, EU and international tax rules including those of the OECD, including the remittance of VAT to the appropriate authorities.”

According to eBay’s headquarters in the United States, the company’s tax affairs are under investigation in other countries as well.

A spokesperson for the company in the US said, “The material jurisdictions where we are subject to potential examination by tax authorities for tax years after 2002 include, among others, the US (Federal and California), Germany, Korea, Israel, Switzerland, United Kingdom and Canada.”

Netflix, on the other hand, reported UK revenue of only £22 million with money received from UK subscriptions channeled to a Netherlands-based branch of the company.

Research conducted by Ampere Analysts, however, suggests that total UK revenue for Netflix based solely on UK subscribers amounts to close to £520 million.

Is There a Problem with Business Structuring & Tax Avoidance in the UK?

These new findings once again raise the question of whether or not international tech companies in the UK are paying their fair share in taxes.

As explained by tax lawyer Jolyon Maugham, “This is the same debate we have with Facebook, Google, Airbnb and Uber.”

Maugham criticized the UK’s tax system, saying that it “only nods in passing to the activities taking place.”

Is There a Problem with Business Structuring & Tax Avoidance in the UK?
Additionally, in an interview with the Financial Times, Caroline Flint, an MP with the Labour Party, said these revelations are “grossly unfair to UK-based businesses who pay their taxes and reject using profit-shifting or shell companies.”

Scottish Labour MSP Neil Findlay agreed with Flint and commented, “If ordinary people have to pay their taxes then it’s an outrage that global giants get away with paying a piffling amount while public services are crying out for investment.”

Furthermore, Liberal Democrat Sir Vince Cable said, “This is the same old story we see time and time again – they are making monkeys out of us. We need to find a better way of taxing large corporations for the activities they conduct here, as a matter of urgency.”

Paul Monaghan, CEO of lobbyist group Fair Tax Mark agreed that tax reform is needed and said, “The figures are simply breathtaking. Our politicians have got to do something about it.”

However, as explained in a Financial Times editorial piece, all the two American companies are doing is “taking advantage of the antiquity of the concepts used in the tax code.”

Any comments on these new findings?

eBay image credited to George W. Bailey / Shutterstock.com

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