eBay pays just £620,000 tax on £1.3bn sales

eBay accused of tax avoidance, but insists it complies with letter of the law

eBay Inc. Illustrations Ahead of Earnings Figures

Online auction site eBay got away with paying just £620,000 in tax on sales of over £1.3 billion last year, its latest accounts reveal.

The company officially declared sales of just £164 million in the UK during 2013, generating profits of around £12.4 million. And, thanks to some generous tax breaks, the company pays just 5% in corporation tax rather than the usual 23%, leading to a bill of just £620,000.

However, the company's US accounts show a different story, with UK sales of £1.3 billion - which would have made it liable for a rather more substantial £71 million in tax.

Even on the supposed UK sales of just £164 million, it would have paid £2.8 million in corporation tax if it were paying the full 23%, rather than the heavily-discounted rate.

Like several other companies, eBay gets away with reporting dramatically-reduced UK sales by using a complicated corporate structure, which in this case involves four different UK subsidiaries.

Profits are funnelled into eBay-owned PayPal, which is registered in Luxembourg, and into Swiss-headquartered eBay International.

Starbucks Paid No UK Corporation Tax Since 2009

'Can't be blamed for taking advantage of the rules'

The revelation will no doubt incense the many UK consumers who started avoiding Amazon after similar revelations and buying from eBay instead.

Like Amazon, eBay says it can't be blamed for taking advantage of the rules, claiming that it "complies fully with all applicable tax laws and regimes including national, EU, and OECD rules".

Other companies slated for using similar tax strategies include Ikea, which channels profits overseas by paying "royalties" to sister firms. Starbucks, meanwhile, paid its first corporation tax in five years last year, after an outcry over its tax avoidance strategies let to a boycott of the coffee chain.

Customers must pay appropriate tax

Interestingly, HM Revenue & Customs (HMRC) has over the last two years been clamping down on people selling items on eBay to ensure they pay the appropriate tax.

"We're not sure how they dodged the publicity on tax planning thus far," writes Chris Dawson of eBay user website TameBay. But, he adds, "If MPs don't like the way current tax legislation works then it's time to change it, not berate companies for acting within the letter of the law."

That's a view that's gaining traction elsewhere. "The easiest way to ensure that every company pays its fair share is to radically simplify the tax system, in Britain and abroad," Andy Silvester, campaign manager at the Taxpayers' Alliance, tells AOL Money.

"Politicians have spent years complaining about tax avoidance, but are less keen to do something about it."

Where are Britain's highest tax bills?

Where are Britain's highest tax bills?

Read more about tax-shy companies on AOL Money:

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