The way that eBay has set up their taxes may end up costing Britain and Germany a combined of $1 billion. eBay set up their European sales offices in Luxembourg. That office only has 9 employees, but eBay Europe Sarl is named as the company’s European Union based to allow it to charge customers a low rate of value added tax.
An organization can use affiliates in Luxembourg to take advantage of the low rates in that country. The Luxembourg unit does not see any sales as the company moves their revenues through an office in Berne, Switzerland. This allows the company to take advantage of the lowest corporate tax rate in Europe.
Now the European Union may investigate eBay if there is reason to believe that their Luxembourg base does not have the resources to be the supplier of goods and services.
“I hope that HMRC takes note… and takes prompt action,” stated the Parliament Public Accounts Committee chairman Margaret Hodge MP. “I will be seeking assurance that they are, next time we take evidence from HMRC.”
eBay is not the only tech company that has been accused of paying less taxes. Apple and Google supposedly use loopholes to avoid billions of dollars worth of taxes.