A recent piece in the Financial Times noted that that eBay’s U.K. subsidiary paid £1.6 million (U.S.$2.11m) in tax last year on revenues of £200 million (U.S.$263.7m) according to figures filed with Companies House, yet its annual report in the United States said U.K. revenues were $1.3 billion. The revenue figure reported in the U.S. filing looks like it included commissions eBay received on sales in the United Kingdom, says the article, but those figures are not included in the U.K. accounts. The article goes on to say that tax experts it consulted say it appears that the U.K. Commission revenue is being routed through the company’s Swiss subsidiary.
This kind of tax avoidance is exactly what the “diverted profits tax,” better known as the “Google tax,” was supposed to capture. In 2015, the government tried to crack down on companies diverting profits overseas to countries with more favourable corporate tax rates, by introducing the Google tax, which taxes at a rate of 25 percent compared with the current U.K. corporation tax rate of 19 percent. The additional tax was called the Google tax following accusations by British MPs of the company’s aggressive tax evasion policies.
