500 Million Reasons To Give Netflix The Thumbs Down

Ladies and gentlemen, we have another US tech giant to add to the list of giant companies that pay less tax than you and I. What's more, it's you and I paying their tax contribution for them -- and we have even given them a rebate from the tax man, although they have paid no corporation tax.

Netflix might make some compelling television shows, but it sounds like they could make a magical show about making GBP500m revenue disappear and not be taxed. That is the thinly veiled accusation in today's media section of The Guardian -- GBP500m in and not a penny out in corporation tax, but instead a GBP174,000 rebate.

Apparently, this payment to Netflix is the result of a tax scheme through which the Government encourages companies to make films in the UK. In this case it was Brad Pitt's War Machine that earned the rebate. 

Now, I'm no accounting wizard, but I do know -- like anyone else with an enquiring mind in the UK -- that The Netherlands is a tax haven within the EU. Its official corporation tax rate is either 20% or 25%, according to the level of profit. However, it is renowned for allowing huge companies to strike deals with its tax authorities for lower rates. These deals are, of course, not publicly disclosed. 

It also has some very lenient rules on taxing capital gains and dividend income flowing into Dutch holding companies from divisions outside The Netherlands.

By the way, you needn't take my word for it -- the European Commission has recently reopened an investigation into The Netherlands effectively offering state aid to huge companies -- Starbucks, Fiat and Ikea get a mention as potential beneficiaries. 

Netflix's defence is that it is, of course, doing nothing illegal in earning so much money in the UK and paying no corporation tax. Strictly speaking, it is correct. That is how crazy the EU is. Set up a shell in the tax haven of The Netherlands and your money can find its way home without coming to the attention of the tax authorities where it is actually made. 

It also points out that its operations raise a lot through the Treasury through VAT and that it makes films in the UK that provide employment. Ok, so let's remember it makes films in the UK with the hope of making a massive profit and because we are the creative capital of Europe. Plus, of course, it gets a tax break, as we have already seen. As for VAT, what are they on about? That's you and I, as subscribers, paying their tax for them.

So, there you have it, another greedy organisation that not only does its best to avoid (that's avoid, not evade) paying its fair share of tax in the country where huge amounts of revenue is made but actually comes out of the deal with a payment of GBP174,000. 

Yes, the world has gone mad -- or at least the EU has -- and yes, do feel free to add Netflix to the list of US tech giants we should all hate but actually end up not being able to live our lives without. 

1 comment about "500 Million Reasons To Give Netflix The Thumbs Down".
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  1. John Grono from GAP Research, June 26, 2018 at 7:26 p.m.

    It's not just the EU Sean, we have the same problem here in Australia.

    We're riven between cutting company taxes to "remain competitive on the world stage", and then giving personal tax cuts as a fairness measure while our deficit and debt continually grow.

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