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Etsy ‘paying right amount of tax’

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Online marketplace Etsy has widely been reported in the mainstream media as having paid £128,000 in UK corporation tax in 2020, with turnover from UK sales hitting £160m across the same period. Etsy is based in Dublin and therefore pays corporation tax on its profits in the Republic of Ireland, regardless of where it trades and generates income.

Miles Dean, head of international tax at Andersen UK, commented: ‘The misplaced outrage in response to this story is a result of a conflation of revenue and profit. Some are throwing out pejorative terms like “funnelled”, which implies that Etsy routed sales through an Irish company that has no substance, while the reality is that Etsy has no connection with the UK other than it being a market for them – being a US headquartered business it is free to choose where it establishes itself.

‘Etsy does not pay UK corporation tax on the profits its Irish company generates because it does not have a taxable presence here through which it is trading. The sales are made by the Irish company on which it pays Irish corporation tax. In other words, Etsy is paying the right amount of tax in the right jurisdiction.’

Tax avoidance think tank, TaxWatch recently reported that implementation of the OECD’s two pillars will likely see a substantial tax cut for companies (including Etsy) which would otherwise have fallen within the scope of the UK’s digital services tax. The pillar one reallocation of profits to the market country will only apply to companies with global turnover of €20bn – Etsy’s global turnover was around $2.3bn in 2021.


Reader response

As the author of the TaxWatch report on Etsy, my interest was piqued by the comments of Miles Dean that Etsy had 'no connection with the UK other than it being a market for them' and that Etsy 'does not have a taxable presence here through which it is trading', leading to his conclusion that 'Etsy is paying the right amount of tax in the right jurisdiction'.

The UK is the second largest market for Etsy outside the United States by some margin. According to Etsy's Chief Operating Officer Linda Kozlowski, speaking to the Associated Press in 2017, Etsy's London office 'is one of our most critical offices for our expansion work, so we actually plan on making sure that we're managing a lot of centralized activities across all of international here.' 

Perhaps Etsy never followed through on its plans, but one might think that if Etsy manages its international operations from an office in the UK, there would at least be a question mark over the extent and nature of Etsy’s taxable presence here.

Perhaps Mr Dean is privy to some insider knowledge of Etsy's corporate structure that is not available to me (none was declared in the comment), but if not, I am not sure such certainties are justified by the facts. 

George Turner, TaxWatch

Issue: 1581
Categories: News
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