Netflix has been accused of “superhighway robbery” by MP Margaret Hodge, citing figures from think tank Tax Watch UK.
With UK revenue for the streaming platform reaching an estimated £1 billion in 2019, Netflix has paid no tax in the UK and has enjoyed tax reliefs instead.
Dame Margaret Hodge told the House of Commons on 3 February that Netflix’s tax structure was “scandalous, intolerable, and unfair”.
Dame Margaret Hodge is the Labour MP for Barking as well as the chair of the All Party Parliamentary Group on Responsible Tax.
Tax Watch UK reported that in 2018, Netflix reported revenues of £43.3 million and profits of just £2 million at its main UK company (Netflix Services UK) and paid no tax.
In fact, Netflix actually received a tax credit under the creative industry tax relief scheme - despite the fact that Netflix will have made an estimated £860 million in revenues from UK customers.
Hodge said, “We are actually handing over cash to Netflix while they stash their profits offshore. It is time to stop the ‘something for nothing’ aggressive tax behaviour of these big companies.
“I say enough is enough. These tax abuses must stop.”
Looking at the most recently filed accounts for Netflix’s 19 UK subsidiaries at Companies House, Tax Watch estimated that the streaming platform made £68.5 million in profit thanks to its 11.5 million UK subscribers.
If Netflix declared those profits in full in the UK, Netflix could end up footing a £13 million corporation tax bill - but instead, these profits are accounted for in the Netherlands.
As a result of these, Netflix paid no UK corporation tax on its earnings.
What is the Digital Services Tax?
The Digital Services Tax will take effect from 1 April 2020 and it will introduce a new 2 per cent tax on revenues of search engines, social media platforms and online marketplaces which derive value from UK users.
As it stands, the Digital Services Tax does not include online streaming services for the charge.
A Netflix spokesperson said that “international taxation needs reform and support the OECD’s proposal for companies to pay more tax in countries where their options help generate value”.
The spokesperson said, “In the meantime, we comply with the rules in every country where to operate.
“We significantly simplified our tax structure last year. Netflix continues to invest heavily in the UK - spending more than £400 million on local productions in 2019, which helped create over 25,000 jobs and training placements.”