Etsy, the well-known online marketplace for handmade and vintage goods, is facing criticism for allegedly underpaying taxes in the UK. Despite earning £160 million in sales in the country, the company only paid £128,000 in corporation tax for the year 2020. Research conducted by campaign group TaxWatch suggests that if Etsy had booked all its sales in the UK, the estimated tax payment would have been around £7 million.

It has been reported that a majority of Etsy’s UK sales are being recorded in Ireland, where they are subject to a lower tax rate. Similar practices have been adopted by other US tech giants, including Facebook, Google, Apple, and Microsoft. Amazon, for example, books a significant portion of its UK business in Luxembourg, resulting in them paying £492 million in UK tax on sales exceeding £20 billion in the previous year.

While Etsy’s tax arrangements are legal, they raise concerns regarding the ethical aspects of generating profits and the amount of tax paid. The company has experienced substantial growth in UK earnings, skyrocketing from $51 million (£40.1 million) in 2018 to $329 million (£243 million) in 2021—an increase of over 600%. Furthermore, Etsy’s acquisition of UK-based secondhand fashion site Depop in June 2021 has further contributed to its sales in the UK.

George Turner, Director of TaxWatch, expressed criticism towards Etsy’s tax practices, stating that despite the company’s claims of ethical behavior, it is simply following the footsteps of other US tech companies by diverting profits from the UK to the tax haven of Ireland. In response to TaxWatch’s findings, Etsy chose not to comment on the specific tax calculation, but confirmed that it had paid a digital services tax in the UK in both 2020 and 2021.

The company’s spokesperson informed The Guardian that Etsy has complied with the current laws on cross-border taxation by paying or accounting for any known and significant tax obligations. They acknowledged the complexity of corporate tax laws in this area and emphasized their commitment to paying their fair share. Etsy also expressed support for the Organisation for Economic Co-operation and Development’s efforts to establish a more equitable and simplified model for cross-border taxation. The company stated that it is open to the possibility of an increased tax bill if it leads to a global consensus on taxing the digital economy.

The revelations about Etsy’s tax arrangements highlight the ongoing challenge of ensuring that multinational corporations pay their fair share of taxes. As the digital economy continues to grow and evolve, it is crucial for governments and international organizations to collaborate and establish fair and effective tax frameworks. These frameworks should prevent profit shifting and ensure that companies contribute their rightful share to the countries in which they operate.

For further information on tax avoidance and multinational corporations, please visit the following links:

1. Tax Justice Network: Corporate Tax Avoidance
2. The Guardian: Amazon, Google, and Apple Must Be Forced to Pay More Tax