Digital streaming service Netflix has been accused by TaxWatch of siphoning off up to £330 million of its profits into tax havens.
According to a report by TaxWatch, Netflix has actively structured the streaming business to avoid taxes and does not collect revenues in the country where they are accrued. Instead, it charges customers from an offshore company. Profits then appear to be shifted from the hub company to a tax haven through the use of intra-company transactions.
The think tank claims that, globally, Netflix moved between £250m and £330m of profits to tax havens in 2018.
TaxWatch estimates that the company’s £860m UK revenue – that it generates through ten million subscribers – is sent to the Netherlands, where it benefits from special tax deals.
The research found that 19 companies controlled by Netflix are operating in the UK and only one of those companies, Netflix Services UK, has filed accounts, with the rest being established only recently.
“None of the Netflix UK production companies have yet filed annual accounts, however, we expect that these companies will be eligible for UK high-end television tax credits, which could lead to a substantial amount of government cash flowing towards Netflix,” the report states.
“The result of this would be that Netflix manages to get a double tax benefit. On the one hand, claiming tax credits on the costs it locates in the UK, whilst apparently moving revenues offshore,” it adds.
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The streaming service is ramping up its production of original content in the UK and the company said it plans to spend over £400m on productions this year alone. This means the level of tax relief the company receives will likely increase.
TaxWatch’s report claims that two UK Netflix entities were given £611,000 tax relief on their productions over 2017-2018.
George Turner, director of TaxWatch, said: “Netflix’s corporate structure is designed to avoid taxes. While the company profits from shifting cash from UK subscribers offshore, it also claims handouts from the UK Government.”
Netflix, which received the report before it was published declined to comment on it, according to TaxWatch.