Online retailer eBay paid just £1.1m in tax in the UK last year, despite telling US investors that Britain was its second largest market, generating revenues of $1.4bn (£1.1bn).
The company appears to have reduced its tax bill by using a corporate structure that routes advertising fees from hundreds of thousands of British sellers through an overseas company, according to UK filings.
The group’s main UK unit reported revenues of just £185m last year and tax of only £1.1m. Latest accounts for eBay (UK) Ltd, which employs 372 staff, many of them at offices in Richmond, west London, confirm the British subsidiary does not receive a penny of the fees paid by UK sellers that advertise goods on eBay.co.uk.
Instead, the UK company’s revenues come from “the provision of services to eBay International AG”, its Swiss parent company. This Bern-based firm, which also uses a branch office in Luxembourg, is at the heart of eBay’s most significant operations outside of Americathe US. It holds the key to hundreds of millions of dollars in tax savings the online auction group enjoys each year.
Like Google, Apple and other hi-tech multinationals, eBay routes income from customers in many of its largest markets, including the UK, through a European sales hub located in a tax-friendly country. The income can then flow into further controversial tax structures that ultimately wipe huge sums off the group’s tax bills.
Last year, the then British chancellor George Osborne introduced a new punitive tax, known as the diverted profits tax, designed to target tech businesses artificially shifting UK revenues abroad. He said such practice had “abused the trust of the British people”.
It later emerged, however, that while some companies, such as Amazon and Facebook, said they would change their tax structures, others – including Google – have continued to book UK sales overseas.
Accounts for Facebook’s main UK subsidiary have been filed with Companies House and are expected to be released next week. They are likely to show a dramatic jump in revenues after income from its largest UK advertisers was included for the first time in the UK company’s accounts. Some experts, however, have suggested there may not be a huge jump in Facebook’s UK taxes because of other factors.
Latest accounts from eBay (UK) Ltd, published on Friday, suggest the group believes its UK tax structure remains advantageous, despite Osborne’s supposed crackdown.
When asked by the Guardian whether it was in discussions with HMRC about the UK’s new diverted profits tax, eBay declined to comment. In a statement, it said: “In all countries and at all times, eBay is fully compliant with national, EU and international tax rules.”
In its annual report, the US parent company eBay Inc confirms that certain subsidiaries have secured favourable tax rulings from authorities in Luxembourg and Switzerland. This effectively approves the group’s controversial European tax structure.
“We benefit from tax rulings concluded in several different jurisdictions, most significantly Switzerland and Luxembourg,” eBay Inc explained in the small print of its annual report. “These rulings provide for significantly lower rates of taxation on certain classes of income and require various thresholds of investment and employment in those jurisdictions.”
As a result of these arrangements, the group said it made tax savings of $319m last year, and $986m over the last three years. eBay Inc enjoyed an effective tax rate for 2015 of 19%, well below headline rates in its three largest markets: the US, UK and Germany.
eBay Inc confirms in its annual report that some tax authorities have called some of its arrangements into question, and that the years 2003 to 2012 remain under scrutiny. Further tax audits are possible in several major markets including the US, UK, Germany and Korea, it said.
Accounts for eBay (UK) Ltd show revenues for 2015 down 2% at £185m, and pretax profits down almost 9% at £8.1m. The tax charge for the year was £1.07m, not all of which was due in the UK because the company is active elsewhere in Europe and in Australia.
eBay (UK) Ltd is not the only British company within the eBay group. Another UK unit is Gumtree.com Ltd, the free-to-advertise online marketplace. It reported pretax profits of £20.2m on sales of £58.7m last year, and tax of £4m.
eBay also owns the music and sports ticket-trading website Stubhub.co.uk, but this UK-facing web business is run by eBay International AG. eBay also owned the payment processing business PayPal until it was de-merged in July last year.
This article was written by Simon Bowers, for theguardian.com on Saturday 8th October 2016 17.55 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010