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EBay 'pays £1.2m in UK tax' on sales of £800m

bbc.co.uk

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Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#21

Post by 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...

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?

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#22

Post by ChuckMcM »

beedogs wrote: post #19
ChuckMcM wrote: post #18

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!"…

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.

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?

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#24

Post by arkem »

Gustomaximus wrote: post #17

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_harbou…

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

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#26

Post by lancewiggs »

ryanwaggoner wrote: post #21

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…

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.

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#27

Post by ktizo »

I find pretty funny the current UK governments avowed surprise at the fact that companies are paying very little tax.

"... In March 2011, the Chancellor of the Exchequer, the British cabinet minister who is responsible for all economic and financial matters, announced in his budget statement three major changes to UK corporation tax."

"The first was that the rate for large companies in the UK was set to fall to 23%. The second was that the UK would move to a corporate tax system where only the profits of companies arising in the UK would be subject to UK corporation tax; this representing a compete reversal of the situation that existed prior to 2009 when UK companies were (albeit convolutedly) taxable on their worldwide income. And thirdly he announced that if in the future a UK company runs its internal banking arrangements through a tax haven subsidiary then that company will benefit from a special UK tax rate of just 5.75 per cent of the resulting profits. ..."

from "Tax havens, secrecy jurisdictions and the breakdown of corporation tax" - http://rwer.wordpress.com/2011/09/06/rwer-issue-57-richard-m...

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#28

Post by maratd »

lancewiggs wrote: post #26
ryanwaggoner wrote: post #21

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…

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.

> 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?

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#29

Post by petercooper »

TomGullen wrote: post #10

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.

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.

Re: EBay 'pays £1.2m in UK tax' on sales of £800m

#30

Post by petercooper »

chime wrote: post #7

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.

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.
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