eBay tax affairs at last hit the spot light
It’s finally happened, eBay have joined the ranks of Amazon, Google and Starbucks as the amount of tax they pay (or don’t pay) is highlighted in the press. We’re not sure how they dodged the publicity on tax planning thus far, but it’s now all over the weekend papers.
Headlines such as “Guess how much tax eBay paid on £1.3 billion profits?” (erm, sales isn’t profits!), “Revealed: Online auction giant eBay pays just £620,000 of UK tax on £1.3billion of sales“, and “eBay paid just £620K tax on sales worth over £1.3 billion” suggest that eBay are avoiding multi-million pound tax bills.
The papers state that eBay reported sales of £164 million in 2013, profits of around £12.4 million and paid tax at treasury approved 5% tax rates of £620,000. They claim the rest of the £1.3 billion sales were funneled through overseas companies in countries such as Luxembourg.
I’m not going to get into the “are eBay paying enough tax argument”, the government sets the rates and it’s up to the government to change the rates if they think companies aren’t paying enough tax.
What does surprise me is the £1.3 billion of sales figure, that’s quite a number to rake in and suggests at 10% eBay fees and 3.5% PayPal fees that eBay annual sales in the UK are approaching £10 billion. Of course there’ll be advertising deals and profits from Shopping.com, Gumtree and a few other bits and bobs, but a vast amount of eBay’s sales will be from eBay and PayPal fees.
Bearing in mind that this year eBay revealed on their 15th birthday that three billion items, worth £65 billion had been sold on eBay UK, the acceleration in sales in recent years must have been massive if they’re approaching double billion pound figures per year. There must be some impressive growth hidden away in the numbers.
The only other surprise is how long it’s taken the papers to turn their focus from Amazon, Google and Starbucks and to take a look at eBay. The question has to be asked however, is it too late (barring the attraction of some lovely headlines full of tax avoiding accusations)?
The government is already looking at tax affairs of large multinationals and how to bring more of the revenues home. MOSS registration begins in just a couple of days time on the 1st of October which is likely to mean eBay will charge UK VAT rates from next year.
eBay’s statement on their tax affairs is short and succinct “eBay complies fully with all applicable tax laws and regimes including national, EU, and OECD rules”. In other words what we’ve been saying for a long time, if MPs don’t like the way current tax legislation works then it’s time to change it, not berate companies for acting within the letter of the law.
everyone sttempts to pay the least tax they can , why should ebay be different
we wonder if these newspapers are squeaky clean
Sorry, don’t agree with you.
These large companies have the best accountants and lawyers that find loopholes in tax legislation. Something us little people will never have. We go to our local accountant, and he might save a few quid here or there.
Ebay, Starbucks etc will pay £1 tax in every £100 and you’re having a go at the newspapers ?
The question is though… If you could pay less tax legally, Would you?
Dave from Trumpton – Any good accountant will exploit as many tax loopholes as possible – thats their job, to make you pay as little tax as possible.
No entity (whether PLC, Limited Company, Sole Trader, Partnership) deserves to be berated for paying the bare minimum amount of tax possible.
Morals don’t come into it, governments shouldn’t leave loopholes.
Morals do come into into it when Paying less than 1% tax.
So to be completely clear – if your accountant says that you need to pay the government £2000, do you send them £3000 because £2000 doesn’t seem like enough?
No. How about I owe them £10,000 tax and through loopholes and accountants I pay them £100.
I’d be embarrassed to pay that, and id be happy if the accountant could knock off a grand.
“No entity (whether PLC, Limited Company, Sole Trader, Partnership) deserves to be berated for paying the bare minimum amount of tax possible.” of cause the do if they are using sharp practices.
Jimbo / Dave
I don’t know whether both of you are being obtuse. Did you ignore the comment about all of this being legal?
Any (sensible) business owner will use the full extent of their ability to reduce their tax liability. Why wouldn’t they?
There are no “sharp” practices involved. These businesses aren’t evading tax, they are avoiding tax (which is completely legal).
The fault lies (and doesn’t lie) with governments. The sad reality is that in a globalised world, companies can move their tax base where they feel like it because for every country that has punitive tax laws, another will welcome them with open arms. The only way to combat this is on a global scale. If the UK went alone in penalising large MNC’s for tax avoidance then we will slowly find ourselves losing big businesses to other countries.
I might even argue that the reason the UK does so well is because it has such favourable tax laws for large MNC’s that they choose to base capital and large number of highly paid staff in the UK who bring in talent and pay tax in the UK.
eBay might be be a pretty shameful company in their treatment of their customers, bad technology and childish approach to solving issues (the problem with this lies with the fact that the e-commerce marketplace in the UK and much of the developed world is an oligopoly with very few players) but they are well within their right to avoid paying tax as much as they can.
James perhaps you don’t know what “sharp practices” means?
Dave said that he’d be happy if his accountant knocked £1000 off his £10,000 tax bill. For the accountant to knock off that £1000, the accountant would work within the law, finding a way to reduce his tax bill to £9000 legally.
So what if your accountant came back and said “Hey Dave, actually I can get your tax bill down to £8000 instead of £9,000. Its all completely above board and within the law”. Thats £2000 in your pocket Dave, instead of £1000.
Would you say no? What about if he could get it to £7000? Or £3000? Or £300? At what point does it go from being morally acceptable (which Dave says £9000 is) to morally repugnant?
The problem is you could ask 1000 people and get 1000 different answers, which is why the government makes law to define what is acceptable. If they knowingly leave loopholes open, then they can’t blame someone for using them.
You can call the practices ‘sharp’ but there is argument that anyone paying more than the government demands, is crazy.
There is nothing unethical / deceitful or unscrupulous about avoiding tax so I don’t consider it to be a “sharp practice”.
“There is nothing unethical / deceitful or unscrupulous about avoiding tax” I’m sure HM Treasury wouldn’t agree with you.
Neither of those links provide any useful information beyond what I’ve already stated (international cohesion by governments to counteract international tax avoidance).
There is little if no mention of the subjective nature of ethics.
The links are essentially pointless and add nothing to your point.
To quote George Osborne “Some technology companies go to extraordinary lengths to pay little or no tax here. If you abuse our tax system, you abuse the trust of the British people”
If they don’t agree then they should change the law.
Having laws that allow this kind of behaviour and then berating companies for working within said law is ridiculous.
“berating companies for working within said law is ridiculous.” ???? They do not work within the law. The law is circumvented.
“berating companies for working within said law is ridiculous.”? The companies do not work within the law they circumvent the law.
Are you some sort of troll or are you unable to read?
These MNC’s are fully complying with the law and using legal loopholes / avenues to avoid paying tax
“Circumventing” if any is done legally and in full compliance (for companies like the above – we’re not discussing those that evade and break the law)
No I’m not a troll and yes I can read.
Perhaps you don’t know what “circumvent” means?
Unreal. Which bit about immoral don’t you understand ?
Yes they get around it legally, but taxes are the heartbeat of the country. Everyone pays their fair share except some immoral corporates who take the absolute mickey.
Don’t see why 25,000,000 Brits have to make up the difference and pay extra to compensate.
“Unreal. Which bit about immoral don’t you understand ?”
Something is either morally right or it isn’t.
You earlier suggested that your accountant legally reducing your hypothetical tax bill from £10,000 to £9,000 is something you’d be happy with. If eBay legally reducing their tax bill is immoral, then so is you reducing yours.
eBay pay the minimum that the government demands they pay. I pay what the minimum that the government demands. Anyone who pays more than is required of them is (IMHO) insane.
The government are only playing their ‘If you abuse our tax system, you abuse the trust of the British people” card to skirt around the fact that by consistently leaving loopholes in our tax system, its really the government which are letting down the British people.
“Perhaps you don’t know what “circumvent” means?”
Jimbo – it doesn’t matter what circumvent means, as they’re not circumventing anything. They are abiding by the rules written in the law book.
More bad press for eBay!
Is there some conspiracy to knock down the share price before Alibaba buys eBay?
Your reply makes no sense.
HMRC looking to clamp down on tax avoidance has nothing to do with “morality” (which in itself is a subjective topic). Therefore both your links are simply showing that the UK government is looking to clamp down on international tax avoidance (like I discussed above has to be done with a global consensus).
You’ve added nothing new by pasting those links and doesn’t change my view on the morality subject.
If anything the directors have positive duty (it is argued that the duty isn’t fiduciary) towards its shareholders to minimise tax obligations
^^ I put my name as Jimbo instead of James!
Is there some conspiracy to knock down the share price before Alibaba buys eBay?
Its been hypothesised thats why Google ditched them in search results. All speculation of course. Looking forward to ebay sales report in October (I think). Is it just me that’s not seeing sales or the whole platform..
government makes billions from ebay via its traders and users , plus it saves billions in benefit payment to those that would otherwise be unemployed if it were not for ebay, though it would be easy to get more if they wish just add a percentage charge to each ebay transaction and use ebay as a tax collector
Honestly. Who cares. The bigger issue should be what ebay are doing to small uk businesses who are starved of sales due to cassini and the new unfair defects system. At least Starbucks employ UK workers who put their wages back in to the economy. All ebay are doing are taking money out the UK and giving it to the chinese, big box retailers and execs.
60% of our sales are to non Eu international buyers ,we turn over around 500k on ebay a year , and were just one of the little guys , so lots of money comes in to the UK via ebay,
I resent Ebay’s attitude towards taxes. Large corporations have adicated their role in society as upholders of communal values. Money generated within UK should be subject to UK tax. It’s for the good of all, and it is not as if they are on wafer thin profits is it!
Not so long ago there was no income tax, no sales tax, mostly tax was on capital like houses hence the window tax. Only houses with more than ten windows got taxed, it was the rich who paid taxes, it was considered immoral to tax the poor and doubly immoral to tax income.
But only the rich could afford to become politicians and in the early 1800s income tax was introduced, it was repealed a few times before it stuck. When income tax stuck the window tax was repealed and the rich had successfully diverted the paying of tax to the poor.
So don’t expect much change from the government, it will continue to represent its constituency (the rich) and collect taxes from the poor by threat of violence (forcibly seizing your assets and locking you up if you don’t pay).
And most of that money it collects from the poor gets spent on goods supplied by its constituency (the rich) at inflated prices.
I have asked Ebay via their Powersellers board to arrange a chat with their tax advisers. I am sure we would benefit from advice on how to be legally tax efficient. So far Ebay have shown no interest in sharing their undoubted skill in this area. Shame!