eBay joins list of firms avoiding most tax - and doing it legally

The auction website eBay has become the latest major company to be accused of tax avoidance after an investigation found it had paid just £1.2m in corporation tax, despite British sales totalling nearly £800m.

The site is among a growing number of international firms revealed to be cutting a vast proportion of their bills entirely legally by channelling profits through countries with far lower tax rates.

Using the company’s worldwide profit margin of 23 per cent, the Sunday Times estimated that eBay’s four UK subsidiaries would have produced profits of £181m.

Were its tax affairs based solely in Britain, it would have owed HMRC £51m in corporation tax – but it was able to reduce that by almost 98 per cent thanks to funds being passing through its offices in Luxembourg and Switzerland.

The claim adds to pressure on the Government to close tax loopholes, with Starbucks disclosed to have paid no corporation tax in the UK at all over the last three years despite £389m sales, Amazon doing likewise on sales of £7.6bn and Facebook paying £238,000 last year on sales of £20.4m.

Google has also been shown to have paid £6m in tax on a turnover of £395m last year, which led to Labour MP John Mann, a member of the Treasury Select Committee, to criticise the practices used by multi-national companies as “entirely improper and immoral” .

eBay, which also owns the online payments firm Paypal, attracted 17 million users in Britain last year. In a statement, a spokesman said: “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.”

The Swedish furniture company Ikea was also reported to have reduced its tax bill by more than half, paying the Government £8.1m rather than the £17.8m it would have done otherwise, by paying fees to other divisions of the firm based in the Netherlands.