Does Your Company's Tax Policy Matter To eBusiness?

Benjamin Ensor

Today is, apparently, Cyber Monday in the UK. But there's a more interesting story in the UK's eCommerce market. It's about tax.

The debate is about the tax policies of a number of prominent multi-national businesses that operate in the UK, including Amazon, eBay, Google, Starbucks and Vodafone, most of which pay little or no Corporation Tax, which is levied as a percentage of profits. (It's relatively easy and perfectly legal for a subsidiary of a multi-national company to avoid taxes on profits in one country by buying services from a sister company in another country so that it makes no profit in the first country.)

Today, the Public Accounts Committee of the House of Commons published a scathing report on tax avoidance by multi-national companies operating in the UK. As the report puts it about Starbucks, which has made no profits in the UK for 14 of the past 15 years: "We found it difficult to believe that a commercial company with a 31% market share by turnover, with a responsibility to its shareholders and investors to make a decent return, was trading with apparent losses for nearly every year of its operation in the UK." What the committee says about Amazon is, if anything, worse.

What's the relevance to eBusiness? While it's uncomfortable for Google and Starbucks to be in the limelight for the wrong reasons, demand for both information and coffee is (presumably) fairly constant through the year. But for retailers Amazon and eBay, the timing couldn't be worse, because this debate is taking place in the run-up to Christmas, the crucial sales period for all retailers in the UK.

This debate raises three questions:

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