According to its latest accounts, online retailer eBay had to pay $1.37 million in tax in the U.K. last year, after using a suspicious system in which they channeled advertisement fees through an oversea company. This is despite telling the U.S. investor that Britain was their second largest market.
According to The Guardian, the British subsidiary didn't receive a single dollar of the fees paid by U.K. sellers that advertise goods on the site. In reality, eBay had revenues of $207 million last year, and paid nothing more than $1.1 million in taxes.
The political response
"Yet again, it seems like another multinational company thinks it can play by different rules to the rest of us. The Tories have dragged their feet for years and voted against tough action to make it harder for firms to avoid UK tax. It's time they followed Labour's lead and started taking corporate tax avoidance seriously," Shadow chancellor John McDonnell told IBT.
eBay is doing what many other hi-tech multinationals do in the UK
In matter fact, eBay is just using the same method as other hi-tech multinationals, by creating a tax-cleaning structure in which they avoid paying the high sums of tax bills and routing the customer's income through a European sales hub. However, eBay exonerates themselves for their actions and approve the European tax structure, by explaining that they only legally took advantage of a jurisdiction weakness.
"We benefit from tax rulings concluded in several different jurisdictions, most significantly Switzerland and Luxembourg. These rulings provide for significantly lower rates of taxation on certain classes of income and require various thresholds of investment and employment in those jurisdictions," explained eBay Inc. through its annual report.
Although it is not known if this situation will continue to happen within the E.U., it is unclear if major companies would keep getting away with it in the future.