Tech companies pay next to no tax in United Kingdom

Despite making huge sums of money in the United Kingdom, many of the major tech companies based there pay surprisingly little tax. Exactly how little has only just started to come to light, thanks to investigations by several national newspapers.

The latest company to be exposed for paying a pittance in UK tax is eBay which, according to the Sunday Times newspaper, paid just £1.2m in 2010, despite its UK subsidiaries generating sales of close to £800m, and making an estimated profit of £181m.

Facebook paid just £238,000 in UK tax last year on sales of £20.4m, according to the Evening Standard newspaper. Although independent analysts believe the social network’s actual turnover was closer to £175m.

According to The Telegraph, Google paid just £6m on earnings of £395m in 2011, and between 2004 and 2010, paid a total of just £8m in UK corporation tax. Amazon was revealed by the Guardian newspaper to have paid no corporation tax at all over the past three years, despite generating sales of more than £7.6bn.

The companies all manage to avoid paying tax by using legal loopholes. Facebook and Google divert their sales through Ireland (a method called the Double Irish), which has a lower corporation tax than the United Kingdom, while eBay and Amazon divert sales through Luxembourg. Apple apparently also uses both Ireland and Luxembourg to reduce its tax liabilities.

The issue is hardly unique to the United Kingdom. In the United States the Senate's Permanent Subcommittee on Investigations recently criticized Microsoft and Hewlett-Packard for using places such as the Cayman Islands to avoid paying a fortune in taxes. And an article in the New York Times estimates that Apple’s federal tax bill would have been $2.4 billion higher last year without the use of tax avoidance schemes.

Do these tactics, or more specifically the figures involved, surprise and/or anger you? The companies are doing nothing legally wrong, but what about morally? Please leave your comments below.

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