Financial Times

US tech groups feel heat on UK tax

by Madison Marriage and Madhumita Murgia - London, FT

October 12, 2017 | 5:18 pm
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Netflix and eBay, two US technology companies with millions of British customers, collectively paid less than £1.7m in UK tax last year, raising new questions about how multinationals structure their businesses to minimise their tax bills.


Ebay’s UK business paid £1.6m in tax on £7.6m of profits and £200m of revenues last year, according to its latest filings with Companies House, the UK corporate registry. However, the ecommerce group has previously told shareholders it registered more than $1.3bn of revenue in the UK in 2016.


The US revenue figure appears to include commissions eBay receives on sales in the UK, but those figures are not included in the UK accounts.


Instead, the UK subsidiary describes its revenue as coming from providing marketing and advertising services to eBay’s Swiss entity, eBay International AG.


Separately, Netflix’s latest UK filings show the TV and film streaming service registered a 39 per cent fall in its UK tax bill to less than €300,000 last year, while its UK revenues and profits nearly halved to €22m and €1m.


The California-based company, thought to have roughly 6.5m subscribers in the UK, books all its subscription revenue from UK users via its parent company Netflix International BV, which is based in the Netherlands. Ampere Analysis, a London-based research firm, estimated Netflix made $520m of subscription revenue last year in the UK – about 20 times what the company’s UK filings suggest – on the basis of estimated UK user numbers and monthly subscription pricing.


Jolyon Maugham, a UK tax barrister, said: “This is the same debate we have with Facebook, Google, Airbnb and Uber. To most people [these companies’ tax payments in the UK] are an outcome that feels counterintuitive or grossly unfair.”


The UK government has attempted to encourage companies to pay more tax by introducing a “Google tax” on profits diverted overseas, in 2015. Profits caught by the levy are taxed at 25 per cent, compared with the current UK corporation tax rate of 19 per cent.


Ebay said: “In all countries and at all times, eBay is fully compliant with national, EU and international tax rules.”


Netflix did not comment on the revenue estimates but said: “In 2016, our UK entity reported €22m revenue and €21m operating expenses on marketing activities, with a profit before tax of €1m and an income tax charge of €269,000. [This makes] an effective tax rate of approximately 27 per cent.”


‘To most people [these companies’ UK tax payments] feel grossly unfair’




by Madison Marriage and Madhumita Murgia - London, FT

October 12, 2017 | 5:18 pm
  |     |     |   Start Conversation

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