

EBay 'pays £1.2m in UK tax' on sales of £800m - sim1066
http://www.bbc.co.uk/news/business-20022365

======
ryanwaggoner
I know this seems outrageous on the face of it, but I suspect the truth may be
quite a bit more nuanced. There's not nearly enough detail here to know what's
going on. Some possibilities that spring to mind:

1\. They may have taken advantage of special tax credits offered by the
government for activities that it was deemed to be in the best interest of
society at large.

2\. Ebay UK may have carry-forward losses from a previous year that lowered
their tax.

3\. These "sales" may just be gross revenue, completely ignoring the issue of
COGS, which means gross income might only be $50m or something much lower. I
know the article cited Ebay's global profit margin as being 23%, but is that
on gross revenue or gross income? That seems high to be on gross revenue...

4\. This revenue may have been earned by subsidiaries owned by Ebay UK, but
the money was never brought into the UK and has been reinvested into those
subsidiaries. For example, Ebay UK owns Ebay Monaco, where there are no corp
taxes. Ebay Monaco does $10m in profit. If they sent that money back to Ebay
UK, they'd owe UK taxes on it. Instead, they reinvest it into hiring more
staff and expanding the Monaco office. If and when the money goes back to the
parent entity, it'll be taxed then.

Getting upset about corporate tax law based on newspaper articles is a fool's
errand.

EDIT: More details:

[http://www.forbes.com/sites/timworstall/2012/10/21/ebay-
is-n...](http://www.forbes.com/sites/timworstall/2012/10/21/ebay-is-not-
avoiding-taxes-no-this-is-instead-the-point-of-the-system/)

Looks like they're just taking advantage of EU law to have payments from
consumers go to a subsidiary in a lower tax jurisdiction. How is this
different from running your company in Texas instead of New York for lower
state taxes?

~~~
lancewiggs
It's legally fine, but ethically corrupt, and ultimately means the country you
are doing business in will decline.

Pay your taxes. And governments - fix these issues, which are only going to
increase as we shift to more and more virtual services.

~~~
maratd
> ethically corrupt

There is nothing ethically corrupt over paying the taxes you legally owe.
There is no ethical or moral duty to pay _more_ than what you owe.

Do you hire somebody to do your taxes? I do. Am I ethically corrupt because I
take measures to make sure I don't pay more than I have to?

------
ChuckMcM
Sigh, another story of "outrage" about how a company is legitimately avoiding
taxation.

Guess what, if you are an international company you can take advantage of the
rules that the local politicians put in place.

I ask people though what do they really want? Do they want Ebay to pay 45% in
tax to the UK so 350M pounds of tax revenue from Ebay? Then the next complaint
will be "Gee nobody does business in our country!" and you have to take the
train over to France or something to buy stuff from Ebay.

So the actual choices are "access to ebay" or "no access to ebay" which do you
want?

~~~
beedogs
Oh. Right. I guess we're "punishing success" (or some other horseshit terms)
by expecting companies to pay their fair share in taxes. And even though
corporate tax laws are written in large part by these very same companies, I'm
sure we should regard them as completely legitimate, as well.

What an absurd argument.

~~~
ChuckMcM
I hear you, but to make your argument you have to define the term 'fair
share'. If you take the working definition that 'fair share' is 'all legally
owed taxes' then guess what, all these people are paying their 'fair share.'
So do you see the problem? You have an internal definition of 'fair share'
which is inconsistent with what the folks who govern the UK have codified as
'fair share.' Is that Ebay's problem? Or is it yours?

~~~
andreasvc
To say that a 'fair share' is the taxes prescribed by the current laws is
ridiculously circular. Of course it's the _intention_ of laws to be fair, but
no one can claim with a straight face that the current loopholes are actually
fair. It's quite obviously unfair because larger companies with more money get
away with paying less.

The problem with these loopholes is an international one; countries screw each
other over with it, and it's difficult to pressure them into closing them.

~~~
ChuckMcM
My claim is that the definition of 'fair share' is codified by the laws on
taxation. If the people don't agree with that code they should change it. An
example that was local to me was California changing their laws on taxation
such that citizens buying from Amazon would not be able to avoid paying local
sales tax. Amazon did however threaten to not sell to anyone in California
(which is kind of a hollow threat since California is huge market).
Californians now pay sales tax on their Amazon purchases.

------
thehodge
Vodafone, Starbucks, Google, Amazon, eBay.. As a person with a few companies
in the UK that pay tax, it seems that the big companies can get away with
whatever, where as last week I had someone from HRMC actually turn up at my
house demanding payment because there had been a mixup with a £4k PAYE
payment.. It beggers belief

~~~
tzs
Your companies probably aren't international, so don't get to enjoy a double
Irish with a Dutch sandwich:
[http://www.nytimes.com/interactive/2012/04/28/business/Doubl...](http://www.nytimes.com/interactive/2012/04/28/business/Double-
Irish-With-A-Dutch-Sandwich.html)

------
chime
Who pays corporation taxes on sales? I thought that's what VAT was for. Isn't
corporation tax based on profit? If the cost of goods sold and expenses were
£795m, then £1.2m on £5m in profit would seem pretty reasonable.

~~~
petercooper
Correct, but you may be assuming the BBC is writing for a financially literate
audience. They are not. They want to perk up a non-story by conjoining two
disconnected facts.

------
patrickod
I don't understand why British news outlets have started to try and "shame"
certain corporations over their tax returns. The practice has been known and
used for many years, yet it's suddenly deemed newsworthy. I'm really surprised
the BBC felt the need to report on this.

~~~
DanBC
News has fashion, and tax avoidance is fashionable at the moment. Partly
that's because government has made announcements about it, and partly because
we're in austerity measures.

~~~
jwdunne
It's also very interesting to note that we have a cabinet who have themselves
been involved in fiddling with their tax returns. The very same who have
proposed and implemented big austerity measures.

I think it's good the public are aware what is happening with tax from
corporations to cabinet ministers to the people. I know a few who wouldn't
have any idea this is a standard thing and probably outraged that the public
are being hammered for tax and large corporations pay relatively little in
comparison (and if they don't, they may have it waivered).

There is another one about how Vodafone owed around £6 billion in tax and it
was let waiver whilst big crackdowns on tax cheats were in progress. I might
have my facts wrong here but most people I speak to about say the same thing:
"it's unfair". This also may be terribly biased though, most people I speak to
are working class and support Labour.

On the flipside, I can imagine some kind of rebound effect if any sort of big
policy was made against it, where big companies are simply less inclined to do
business here, with our economy suffering as a result since we're £100m out of
pocket rather than £6bn up per co.

I don't know much about politics or economics, I merely reiterate what the
majority of people say about it all and my own perspective. Please correct me
if I'm wrong.

------
jasonlingx
Corporations, small businesses and even people will rationally pay only the
minimum tax that they can get away with under the law. The law favours big
international corporations so this is what you get. If you find this
inequitable then laws need to be changed. On the other hand big corporations
as well as wealthy people usually have more leverage in terms of being able to
move and operate or reside in more tax-friendly or hospitable regimes.

~~~
Silhouette
_On the other hand big corporations as well as wealthy people usually have
more leverage in terms of being able to move and operate or reside in more
tax-friendly or hospitable regimes._

That's often claimed, but I'm not convinced. Some people/businesses might move
away because of being forced to pay tax at the same rate as everyone else.
Most people/businesses won't, because most people don't choose where to live
only by tax rate and most businesses aren't going to give up a market of 60+
million people. And frankly, if they're only paying a million or so in taxes
at that size, good riddance to those who think they can do better elsewhere
anyway.

~~~
jasonlingx
Businesses might not be able to choose so much where their market is, but they
surely have a choice in where they set up manufacturing, R&D, corporate HQ etc
etc. Countries constantly compete for business investment.

Wealthy individuals are similar. They probably won't move their chosen country
of residence for tax reasons, but I am pretty sure they will move their assets
and investments to protect their value.

Most tax systems are inherently unfair with the middle-class and small
business taking more than their fair share of the burden. The increasingly
globalised and virtual nature of the economy only exacerbates this.

~~~
chii
I suspect that the equilibrium would be that there is no taxation, but also
there is no social net and welfare.

The divide between the haves and the have nots will grow and grow.

------
nikcub
This is why consumption taxes are good - you can't get away from them. On the
£3B of sales from Starbucks, they would have contributed at least £600M in
consumption taxes (known as the VAT in the UK and at a rate of 20%).

Getting rid of corporate taxes and increasing consumption taxes
proportionately would be a good way around this, although as much as it makes
sense, and it is a popular position amongst economist - I can't imagine it
being a popular political platform.

~~~
chii
consumption tax (like VAT, or GST in australia), unfairly taxes the poor as a
percentage of their income.

The gov't tries to fix this by having some categories of goods that are _not_
taxed (at least this is true in australia), to alleviate this problem, but its
not quite perfect.

I don't like consumption tax at all. However, i can't think of a way to levy
that won't have loopeholes for the mega rich.

~~~
Silhouette
Consumption taxes are regressive, and arguably not so desirable for that
reason. However, it's a lot easier to change the personal income tax system in
one country to balance that effect for its own citizens than it is to change
corporation taxes on profits that operate as a global market.

Having big players in that market win the game by bending the rules in ways
most people can't, ultimately denying tax revenue to some nations so those
nations have to increase taxes on smaller businesses and individuals, isn't
exactly doing the poor in those nations any favours either.

------
surrealize
From the article:

> According to the Sunday Times, eBay had sales of £789m during 2010 in the UK
> at its four British subsidiaries. Using its worldwide profit margin of 23%,
> it would have made a profit in the UK of £181m, leading to corporation tax
> owed of £51m.

That's making a pretty big assumption, that Ebay's UK profit margin is the
same as its worldwide profit margin.

~~~
jammmuel
Why? I doubt it's an order of magnitude out.

------
fourstar
It's technically legal, but now it seems the Brits are getting a little
jealous and want some of that pie for themselves.

------
tangue
Ebay is based in Luxemburg, if it were in an offshore fiscal paradise I would
have understood, but hey this is Europe. If something is broken in Europe
don't blame companies, they're not the ones sitting in parliament.

~~~
rhplus
If you've ever purchased Apple apps through the app store in Europe, you'll
notice the developer is listed as "iTunes S.a.r.l". It's similar for web-
services purchased through "Amazon Services Europe S.a r.l" and transactions
through PayPal and Skype. All are registered as companies in Luxembourg[0], to
take advantage of more attractive tax structures and legal codes while still
being within the EU trading zone. Skype seems to be a bit of an exception in
that most of its engineering is done there too, not just the financial
transactions. Apple purportedly is not much more than a small office[1].

[0] <http://www.investinluxembourg.lu/ict>

[1] [http://treasureislands.org/this-is-what-apple-itunes-
europe-...](http://treasureislands.org/this-is-what-apple-itunes-europe-looks-
like/)

~~~
tangue
That's what I meant with "something is broken in Europe". The concept of tax
competition has been encouraged by the european commission. They've created
this situation where each country competes against others. I won't blame the
companies for playing by their rules.

------
Gustomaximus
This reminds me of the 'bottom of the harbour' tax scheme from the 70's in
Australia (though that was properly criminal).

Something I liked about how they dealt with it was they changed the law
retrospectively meaning companies/individuals had to pay back tax they had
avoided from previous years. I would love to see this done more where there is
blatant tax avoidance.

[http://en.wikipedia.org/wiki/Bottom_of_the_harbour_tax_avoid...](http://en.wikipedia.org/wiki/Bottom_of_the_harbour_tax_avoidance)

~~~
arkem
Applying new laws retrospectively makes me nervous. Why should anyone be
compelled to follow laws that don't currently exist?

------
TomGullen
Why can't they change the tax law to tax these companies? I know it would be
difficult, but it can't be impossible. These companies will always want to
operate here.

~~~
petercooper
Because the UK can't arbitrarily change laws easily in the majority of cases
any more due to being a member of the European Union.

What would they be taxing anyway? If they're like many of the other companies
similar stories have risen up about, they're paying a subsidiary in another EU
country for rights to the brand. So we'd either need to outlaw free trade
between EU states (which the EU won't allow) or somehow tax businesses not on
profit but on turnover which would be grossly unfair.

~~~
Silhouette
No, there is a third option that is looking increasingly credible: the UK
could leave the EU altogether. Whatever the arguments for being in or out more
generally, in financial terms that is almost certainly a win as things stand
today, and it looks like any realistic outcome of the Euro problems will only
strengthen the case.

~~~
tonyedgecombe
I'm not sure about that, if the UK wants to continue trading with the EU from
outside then they will be forced to pay for that privilege some way or
another.

~~~
Silhouette
But the "Europe project" originally _was_ about free trade. It worked pretty
well for the most part, too: we managed with multilateral free trade
agreements for years without things like legislative policy and currency
getting centralised as well, and there are still alternative platforms for
cooperation like the EFTA and EEA, which for example include some Scandinavian
nations that are not part of the EU.

Given the UK's disproportionate strength, I don't see why it couldn't move to
a similar relationship to what those Scandinavian nations have with Europe,
being outside of the main EU and the Eurozone but still sharing common ground
elsewhere. So until someone wiser about economics tells me otherwise, I think
I stand by my previous position: whatever the pros and cons of being in the EU
more generally, financially it's almost certainly in the UK's interest to
leave.

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jasiek
It looks like the only tax regime that is stable in terms of revenue is one
with low corporate income tax and relatively high personal income tax.

