Should eBay pay higher UK taxes?

It’s been all over the news this weekend that eBay only paid around £1.2 million in tax in the UK for 2010, on total sales across it’s four UK subsidiaries of almost £800 million.

eBay aren’t the first to be highlighted for paying low UK taxes, Amazon, Apple, Facebook, Google and Starbucks have all recently been in the news for doing the same. However the taxes paid aren’t the whole story.

This is the corporation tax, it doesn’t take into account tax bills such as income tax national insurance etc and the media also tend to forget that we’re in the EU. eBay have chosen to headquarter themselves in Luxembourg and Switzerland where corporation tax is lower as is VAT.

Certainly choosing where to base a company for tax purposes isn’t a practical option for many of the businesses that trade on eBay, but it shouldn’t be forgotten that it’s our government that’s given these companies the loopholes to lower their taxes in this manner. For years companies like Play.com and Amazon have had operations based in the Channel Islands for just such a reason, although that location isn’t as attractive as it was in the past.

The question you have to ask is why aren’t the companies choosing to base themselves in the UK? Luxembourg is part of the EU, and yet has much lower rates of tax. Companies have to base themselves somewhere within the EU, and when it’s an international and in fact a global company, they’re going to plump for the country that gives them the most advantageous tax arrangements.

There’s absolutely no question that eBay and other companies aren’t paying all the taxes due in the UK, the EU and the rest of the world, it’s just that their financial arrangements make UK taxes low.

The EU was touted as breaking down borders and allowing the sale and purchases of goods and services across national borders without restriction. It’s not working too well though, for example very few people purchase for instance home buildings and contents insurance from the EU rather than a UK based company.

The media shouldn’t be asking why companies are paying so little tax within the UK. They should be asking a more fundamental question which is why aren’t the same companies choosing to base themselves in the UK and pay UK taxes, why isn’t the UK an attractive place to do business?