Ebay paid £1.6m in UK tax on $1.3bn in revenue

Ebay’s UK business paid £1.6m in tax last year, despite the ecommerce company reporting to shareholders that it registered more than $1.3bn in revenues in Britain over the same period.

The online retailer’s latest UK filings to Companies House on Saturday said that revenues in Britain increased 8 per cent to £200m for the calendar year 2016. Its UK tax payment fell 3 per cent to £1.6m after profits dropped 5 per cent to £7.6m.

However, eBay’s US annual report for 2016 states UK revenues last year were $1.3bn. Britain is the California-based company’s third-largest market after the US and Germany.

The US revenue figure appears to include commissions eBay receives on sales in the UK, but those figures are not included in the UK accounts.

Instead the UK subsidiary describes its revenue as coming from providing marketing and advertising services to eBay’s Swiss entity, eBay International AG.

Several tax experts who looked at the Companies House filings said the UK commission revenue appears to be routed to the company’s Swiss entity.

The US accounts do not break out profits by country.

Ebay declined to comment on the reason for the different UK and US revenue figures. The company said: “In all countries and at all times, eBay is fully compliant with national, EU and international tax rules including those of the OECD, including the remittance of [value added tax] to the appropriate authorities.”

Jolyon Maugham, a UK tax barrister and campaigner against corporate avoidance strategies, said eBay’s UK accounts suggested that its UK “tax liabilities are not a function of the profits that they make on their UK-based sales”.

He added: “This is the same debate we have with Facebook, Google, Airbnb and Uber. To most people [these companies’ tax payments in the UK] are an outcome that feels counterintuitive or grossly unfair.

“This illustrates how divorced our corporate tax system has become from the world in which it is supposed to operate. You have a tax system that only nods in passing to the activities taking place.”

The UK government has attempted to encourage internet companies to pay more tax by introducing the so-called “Google tax” — a levy on profits diverted overseas — in 2015. Profits caught by the levy are taxed at 25 per cent compared to the current UK corporation tax rate of 19 per cent.

A UK tax lawyer, speaking on condition of anonymity, said, “The interesting thing is eBay has not made any provision for the diverted profits tax here. The question is whether more of their profits should be booked through a UK entity.”

Some lawyers have questioned the success of the new UK levy, which was intended to encourage companies to restructure their businesses to pay more corporation tax in the UK and avoid the higher punitive tax rate. Ecommerce giant Amazon is one of the few companies to have restructured its UK operations after the diverted profits levy was introduced.

“I know that many in the industry are surprised that more businesses have not adjusted their behaviour,” Mr Maugham said.

Ebay, which reduced its UK headcount by nearly a third last year to 294 staff, said in its US annual accounts that it benefited from tax rulings in several jurisdictions, “most significantly Switzerland and Luxembourg”. It estimated the cash benefit of these rulings came to $307m last year.

“We expect to continue to benefit from lower tax rates due to our continued operations in foreign jurisdictions, in particular, in Switzerland,” it said.

The company added that its effective global tax rate improved from 19 per cent in 2015 to receiving more back from tax authorities than it paid in 2016 due to a reorganisation of its legal structure.

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