eBay is reported to be the latest tech company not to meet the minimum reserve
Ebay has become the latest tech company to be accused of using legal loopholes to minimise the amount of tax it pays in the UK.
A report in The Sunday Times reported that the auction site paid just £1.2 million in corporation tax on the £789 million profit it made in the UK in 2010. This is far less than the estimated £51 million that the newspaper suggested eBay should have paid, according to the most recent figures available.
eBay UK Tax Techniques
Ebay was able to cut its tax ball so dramatically by channelling the fees paid by sellers through PayPal, which itself is based in Luxembourg. The website’s UK subsidiaries effectively supply ‘services’ to a company in Switzerland called eBay International AG.
The technique is similar to the one employed by other tech firms Facebook and Google, which operate in the UK as a subsidiary of their Dublin Offices to take advantage of lower Irish tax rates. Under this scheme, both companies’ pay UK tax only on a “commission”, with the majority of the revenue going to Ireland.
Facebook apparently paid tax on just 11 percent of its sales in the UK during 2011. It reportedly paid just £195,890 to the treasury, despite making an estimated £175 million in the country. This is less than the £275,000-a-head staffing costs of its 90 UK employees. Other companies, such as Starbucks and Ikea have also been accused of using such legal loopholes.
Ironically, HM Revenues and Customs (HMRC) had used web robots to identify tax cheats that trade on the popular auction site. At the time of publication, eBay had not responded to requests for comment.
What do you know about Tech stocks and shares? Find out with our quiz!