Netflix accused of 'superhighway robbery' over tax bill, as UK revenue hits £1bn

Dame Margaret Hodge tells Commons the movie-streaming giant is taking British taxpayers 'for a ride'

Netflix received nearly £1m in tax breaks in 2017/18, under the creative industries tax relief scheme
Netflix received nearly £1m in tax breaks in 2017/18, under the creative industries tax relief scheme

Netflix has been accused of “superhighway robbery” over its tax affairs as revenue from UK subscribers hit an estimated £1bn in 2019.

Dame Margaret Hodge is to tell the House of Commons that Netflix does not pay tax on profits generated in the UK and has enjoyed close to £1m in tax reliefs in the last two years.

Citing figures from the think tank Tax Watch UK, Dame Margaret will say that Netflix was taking taxpayers “for a ride”.

“We are actually handing over cash to Netflix while they stash their profits offshore.

“It is time to stop the 'something for nothing' aggressive tax behaviour of these big companies. I say enough is enough. These tax abuses must stop.”

Tax Watch looked at the most recently-filed accounts for Netflix's 19 UK subsidiaries at Companies House. It estimated that the streaming service made £68.5m in profit from its 11.5m subscribers in the UK.

If those profits were declared here in full, Netflix would be in line for a £13m corporation tax bill, but they are accounted for in the Netherlands.

As a result, the company paid no UK corporation tax on its earnings and received nearly £1m in tax breaks in 2017/18, under government's creative industries tax relief scheme.

A Netflix spokesperson said that “international taxation needs reform and we support the OECD’s proposal for companies to pay more tax in the countries where their operations help generate value".

"In the meantime, we comply with the rules in every country where we operate."

The company claimed that Tax Watch’s report had a “number of inaccuracies”, including that Netflix has a Caribbean-based entity. Netflix did have a Caribbean entity but closed it down last year.

Netflix enjoyed a blockbuster 2019 with profits up 63 per cent to around $2bn, its latest financial figures, published in the US, show.

George Turner, director of Tax Watch UK, said: “Netflix is making billions in profit worldwide, but despite thousands of staff and millions of subscribers in the UK, the company is still claiming that it makes almost no profit in the UK and claiming large subsidies from the government.

“This is only possible because the company operates a similar structure to other well known corporate tax avoiders operating in the digital space.

“After having spent years flying under the radar, it is welcome news that MPs will put Netflix's tax arrangements under the spotlight in parliament tonight and HMRC too seems to be showing an interest in its approach.”

Tensions have escalated over how to tax digital companies after US treasury secretary Steve Mnuchin threatened last month to hike taxes on car companies if Boris Johnson presses ahead with plans for a levy on tech giants such as Google and Facebook.

At the World Economic Forum in Davos, Mr Mnuchin said that the US considered the UK’s proposed digital services tax to be “discriminatory” and warned that Washington could impose retaliatory taxes.

Also at davos, the US and France sealed a truce over Emmanuel Macron’s plans to introduce a similar measure after Washington responded with a threat to slap punitive tariffs on French cheese and wine. However, the issue has yet to be resolved.

Washington has insisted that countries must not implement unilateral taxes on tech firms. Instead, US officials want governments to wait for agreement to be reached on an international solution currently being brokered by the OECD.

That process is seeking to develop two "pillars". The first is a so-called unitary approach to corporation which would see multinationals' bills determined by where they actually do business, rather than where they happen to book their profits.

America wants that pillar to be voluntary, a status which some experts say would make it ineffective. The second pillar will be a fall-back option that implements a minimum global tax rate on corporate profits of 10.5 per cent - lower than is available in some countries such as Ireland which are already favoured destinations for technology companies to channel their profits.

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