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eBay accused of tax avoidance

eBay joins the growing list of firms using overseas tax havens to avoid corporation tax.

eBay has become the latest in a string of multinational companies to face scrutiny over the use of canny accounting techniques to avoid paying corporation tax in the UK.
The online auction house recorded £800 million in revenue and an estimated profit of £181 million in 2010  – the last year data was available. At the 2010 rate of corporation tax – 28 per cent – eBay should have paid £51 million to the exchequer.

Instead, the US-based company paid just £1.2 million, The Sunday Times revealed. 

The methods employed by eBay included legally channelling PayPal payments through subsidiaries in Luxembourg and designating its UK division as a “provider of services” to Switzerland-based eBay International AG. Both countries are tax havens.

When questioned, an eBay spokesman denied any wrongdoing:

“eBay in Europe works with tax authorities and complies fully with all applicable tax laws and regimes – including national, EU, and internationally recognised OECD rules”.

However, the revelations have caused a stir amongst MPs amid a series of accusations of international companies avoiding tax in the UK. Last week, Reuters unearthed that Starbucks had paid just £8.5 million in corporation tax in the last decade, despite raking in over £3 billion in revenue.

Likewise, Facebook paid just £238,000 on sales of almost £21 million in 2011 after the company began redirecting income through its European base in Dublin, where corporation tax is significantly lower than in the UK.

IKEA has reportedly slashed its tax bill in half through paying franchise fees to a separate company in Holland, which vastly reduced the furniture giant’s taxable UK income by registering up to £35.7 million in profits to the dutch firm.

Liberal Democrat peer Lord Oakeshott called for greater action by the Government to close tax loopholes:

“HMRC has got to be tougher on cracking down on this. What we need is total transparency on corporation tax actually paid each year by companies and detailed reasons why it is below the headline rate”.

Alex Ward is a London-based freelance journalist who has previously worked for the Times & the Press Association. Twitter: @alexward3000