EBay 'pays £1.2m in UK tax' on sales of £800m
bbc.co.uk
bbc.co.uk
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?
Pay your taxes. And governments - fix these issues, which are only going to increase as we shift to more and more virtual services.
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?
It's very natural for private companies to reduce costs where possible, and reducing taxes is certainly a clever way to do so. This is, I believe, very positive, as it shows to the countries with high tax rates that they are missing out on tax dollars simply because they are making it way to expensive for large corporations to operate that way. This means any tax increase (like the ones suggested recently in France) will more likely hit the small and mid-sized players who do not benefit for the same know-how and scale to manage their tax cuts efficiently -> therefore reducing the actual benefit of further raising taxes. The fact that these practices remain legal puts a stop on inflating taxes gaps between countries as well.
By the way, avoiding taxes LEGALLY does not mean it is "ethically" corrupt to do so. I, for one, consider that taxation has very little ground when you see how much of the money the State collects is wasted in so many ways, through poor management, bad investments, poor efficiency, making war (that only a minority approves of), and seen how much power you have to change anything about it. On the contrary, limiting the growth of the amount of cash controlled by the State should be considered a good thing, in absolute terms.
What do you seriously expect them to do? They are entities that exist to maximize profit. The only time we should be angry at corporations is when they actually break the law.
When corporations are paying low taxes and doing so legally; it's politicians we should be angry at.
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!" and you have to take the train over to France or something to buy stuff from Ebay.
So the actual choices are "access to ebay" or "no access to ebay" which do you want?
What an absurd argument.
Now some will say "Corporations elect legislators" except that isn't true at all, at least not in California. The only thing corporations and so called 'super pacs' can do is throw money at getting someone elected, and Meg Whitman proved that no matter how much money you throw at it you can't buy an election (at least not yet). The thing that gets bad politicians elected in California is voter apathy, you see most of our election races are decided by a few percent of the counted vote, and the counted vote is nearly always less than 60% of the registered voters, and sometimes less than 50%. In a number of races each year the incumbent runs unopposed or against an opponent who has no interest in actually being elected. If a small fraction of those apathetic voters actually voted, they could remove any and all of the incumbent politicians. But they don't. And they often don't because they have been told that their votes don't count, and that all of the elections are rigged by who has the most money. And that is something the corporations who like it this way, are very good at doing. Getting 'news' stories out to the voters about just how ineffective and worthless their votes are so don't bother getting out of bed, just stay home, it won't matter anyway.
The 99% could effect instant regime change in the US by actually voting. And they don't. And yes that is society's problem as you so aptly point out. But it has absolutely nothing to do with capitalism.
The choice a voter makes can't just be arbituary (i.e., flip a coin to vote). If they are to make an informed decision, it will require investment in effort and time. The voters that are most apathetic are more likely to be poor, and won't have time to invest in such endeavours. Obviously, this perpetuates the problem, but the cause is that, in the mind of the apathetic voter, their time is better spent making money, or making the most of their spare time to have fun, instead of the chore of working out who to vote for.
There is no answer to this problem, as it is a problem with the mindset - they do consider their other activities more important, but they do so because they just don't have the resources to invest in civic activities.
The reason its effective is because elections in the US are very bias sensitive, the very small margins of victory for one candidate or another means that a small change in voter sympathy can change the outcome of the election. Further, by creating a selection criteria of 'like' / 'don't like' in the voter input, you set up a genetic algorithm for evolving government.
There a probably a couple of dozen 'evolution simulators' available on the web. They all work in the same way, they take a population of organisms, they exist for a while in an environment, and then they 'reproduce' with a selection bias. Over a few generations the selection bias results in a population that demonstrates the characteristic that the selection bias is targeted toward. The basic mechanism is that organisms that align with the selection bias 'win' (and thus reproduce) and those that don't align 'die.'
That algorithm doesn't care what the 'lifeform' is, and it always works. That is part of the reason it annoys folks who favor an intelligent design theory of evolution.
Elections are the 'reproduction' cycle of politicians. Their 'survival' depends on them managing the bias in their favor which they have a limited amount of power to do. If the current non-voting block of citizens jumped into the game and voted 'like'/'do not like' it would force government to 'evolve' a set of politicians that were doing a good job as defined by the people who vote.
Clearly this doesn't work when the government is rigging the elections (as Russia was accused of doing to counter unexpected voter turnout) but it certainly does in a fair election.
The problem with these loopholes is an international one; countries screw each other over with it, and it's difficult to pressure them into closing them.
I think it's good the public are aware what is happening with tax from corporations to cabinet ministers to the people. I know a few who wouldn't have any idea this is a standard thing and probably outraged that the public are being hammered for tax and large corporations pay relatively little in comparison (and if they don't, they may have it waivered).
There is another one about how Vodafone owed around £6 billion in tax and it was let waiver whilst big crackdowns on tax cheats were in progress. I might have my facts wrong here but most people I speak to about say the same thing: "it's unfair". This also may be terribly biased though, most people I speak to are working class and support Labour.
On the flipside, I can imagine some kind of rebound effect if any sort of big policy was made against it, where big companies are simply less inclined to do business here, with our economy suffering as a result since we're £100m out of pocket rather than £6bn up per co.
I don't know much about politics or economics, I merely reiterate what the majority of people say about it all and my own perspective. Please correct me if I'm wrong.
That's often claimed, but I'm not convinced. Some people/businesses might move away because of being forced to pay tax at the same rate as everyone else. Most people/businesses won't, because most people don't choose where to live only by tax rate and most businesses aren't going to give up a market of 60+ million people. And frankly, if they're only paying a million or so in taxes at that size, good riddance to those who think they can do better elsewhere anyway.
Wealthy individuals are similar. They probably won't move their chosen country of residence for tax reasons, but I am pretty sure they will move their assets and investments to protect their value.
Most tax systems are inherently unfair with the middle-class and small business taking more than their fair share of the burden. The increasingly globalised and virtual nature of the economy only exacerbates this.
The divide between the haves and the have nots will grow and grow.
In which case surely the solution is to change the basis of taxation from profits to alternative sources such as sales or commercial property, which are inherently tied to the real location where things are happening, at least for bricks 'n' mortar businesses.
Taxing on-line transactions is trickier, but even in that case there are certain relatively broad international agreemeents covering things like VAT across Europe rather than in individual countries.
Most tax systems are inherently unfair with the middle-class and small business taking more than their fair share of the burden. The increasingly globalised and virtual nature of the economy only exacerbates this.
That is probably all true right now, but it doesn't mean we have to leave things that way. Speaking as someone who runs small businesses in the UK that pay their taxes at the normal rate, with those taxes ultimately reducing the money that reaches the owners, it really is galling to see reports of big international companies getting such favourable treatment.
http://www.npr.org/blogs/money/2011/04/22/135635574/the-frid...
They found, based on research, that the effect was negligible, and that other impacts of increasing taxes are much more noteworthy.
Getting rid of corporate taxes and increasing consumption taxes proportionately would be a good way around this, although as much as it makes sense, and it is a popular position amongst economist - I can't imagine it being a popular political platform.
The gov't tries to fix this by having some categories of goods that are _not_ taxed (at least this is true in australia), to alleviate this problem, but its not quite perfect.
I don't like consumption tax at all. However, i can't think of a way to levy that won't have loopeholes for the mega rich.
Having big players in that market win the game by bending the rules in ways most people can't, ultimately denying tax revenue to some nations so those nations have to increase taxes on smaller businesses and individuals, isn't exactly doing the poor in those nations any favours either.
> According to the Sunday Times, eBay had sales of £789m during 2010 in the UK at its four British subsidiaries. Using its worldwide profit margin of 23%, it would have made a profit in the UK of £181m, leading to corporation tax owed of £51m.
That's making a pretty big assumption, that Ebay's UK profit margin is the same as its worldwide profit margin.
[0] http://www.investinluxembourg.lu/ict
[1] http://treasureislands.org/this-is-what-apple-itunes-europe-...
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_harbour_tax_avoid...
In my opinion, every democratic country should make the following change to their laws: Politicians cannot own, or have a stake in, any commercial enterprise. Needs to be a bit refined but you get the idea.
This way, there is a web of transparency so that any dodgy transactions will be definintely caught (probably by the opposing party).
It sucks that these days, its possible to "hide" the true owners of companies and stocks. Its not in the public interest to have this feature.
Also, it would be blatantly illegal under our privacy laws to force that kind of disclosure for relations who aren't the ones making the choice but whose intimate financial details would suddenly become public, and rightly so IMHO.
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.
Given the UK's disproportionate strength, I don't see why it couldn't move to a similar relationship to what those Scandinavian nations have with Europe, being outside of the main EU and the Eurozone but still sharing common ground elsewhere. So until someone wiser about economics tells me otherwise, I think I stand by my previous position: whatever the pros and cons of being in the EU more generally, financially it's almost certainly in the UK's interest to leave.
This way, if you pay for a "brand" with $100m, it seems very sus when the subsituary is also owned by a related set of people.
They're working on it: