Are you buying from a tax haven?
New research from Ethical Consumer has found that a number of online music stores are using tax havens to accept payment for UK sales. We bought goods from all the companies on the score tables and found that several were, like Amazon, selling via subsidiaries based in tax havens.
CDs and MP3s
The most high profile MP3 vendors using tax havens are Google and Apple. Google Play is registered in Ireland, a country used by many US companies to hide profits and reduce tax. The country has a tax rate around two thirds lower than the US. The receipt from the item we purchased contained an Irish address.
Meanwhile the Terms & Conditions of using Apple’s iTunes store clearly state that the company you are doing business with is ITUNES SARL, registered in Luxembourg.
Two other companies on the table, 7digital and Beatport, are also selling from a Luxembourg address.
Base.com stated on their receipt that, “This item has been fulfilled by Online Commerce GmbH (Switzerland). For this sale Online Commerce Ltd. (UK) has operated as an agent for its subsidiary company Online Commerce GmbH. (Switzerland).” This suggests a likely tax avoidance strategy, and has been rated as such on our score table.
Two streaming websites are also using a tax haven address. Napster is registered in Luxembourg with its Terms and Conditions clearly stating that any consumer entering into a contract with the company would be dealing directly with NAPSTER LUXEMBOURG S.A.R.L.
In the classical section, Naxos is the only company that offers a streaming service (in addition to CDs) but its registered address is in Hong Kong with the same Hong Kong address appearing on the receipt for a year-long UK subscription.
A marketplace is a website which companies or individuals can use to sell their goods online for either a percentage of the sale or for a listing fee. The marketplaces in this report are Amazon, ebay, Gumtree, Play.com, Discogs and MusicStack.
Of the marketplaces, Play.com’s UK arm is registered in Jersey while its immediate parent is registered in Luxembourg. eBay is registered in the tax haven of Delaware, USA.
It’s also worth noting that, when using a marketplace, you might be buying from a vendor that sells from a tax haven. For instance, CDs sold by Base.com often appear on Play.com’s trading platform.
Furthermore, some companies that sell over the various trading platforms only offer payment via Paypal. While the companies themselves might not be operating out of a tax haven, Paypal is owned by eBay and is registered in Luxembourg. For every purchase made using Paypal a percentage of the sale will go to Paypal via their Luxembourg address. Discogs is the only company to offer just Paypal as a method of payment.
Our tax rankings
To improve our ranking system we have set up a new category on our database to include online companies selling via tax havens. This is in addition to our category of ‘likely use of tax avoidance strategies’ which looks at registered subsidiaries in places such as Jersey.
Of the companies on the score tables, nine score worst for the likely use of tax avoidance strategies (in the Anti-Social Finance category):
- Spotify is registered in the high risk jurisdiction of Delaware in the USA with subsidiaries in Luxembourg, Monaco and Switzerland.
- Rovi (which owns eMusic) is incorporated in Delaware with further subsidiaries registered in the British Virgin Islands and Hong Kong as well as a licensing company in Switzerland.
- eBay is incorporated in Delaware with subsidiaries in the Cayman Islands, Luxembourg, Switzerland, Singapore, Mauritius and the British Virgin Islands.
- Rakuten owner of Play.com had subsidiaries in Jersey, Hong Kong, the Cayman Islands and Luxembourg.
- Google Inc is registered in Delaware and has subsidiaries in a number of tax havens including Singapore, Hong Kong, Switzerland and Bermuda.
- Tesco plc lists a number of subsidiaries in tax havens including Guernsey, Hong Kong, Jersey, Luxembourg, the Cayman Islands and Switzerland.
- Sainsbury’s has subsidiaries in the Isle of Man, the Cayman Islands, Jersey, Hong Kong and Guernsey.
- Amazon is registered in Delaware and also has other subsidiaries in tax havens such as Amazon Europe Holding Technologies SCS in Luxembourg.
- Wal-mart Stores lists a number of subsidiaries in tax havens including Jersey, Switzerland, Luxembourg and the British Virgin Islands.
- Three companies score a middle rating:
- Apple has subsidiaries registered in Ireland, Nevada, Hong Kong, Singapore and Switzerland.
- Sony has subsidiaries in Switzerland, Hong Kong, Singapore and Luxembourg.
- Steinway Music has numerous subsidiaries in Delaware.
More on how we rate companies on tax >