Netflix: Tax Affairs

Debate between Baroness Hodge of Barking and Catherine McKinnell

Monday 3rd February 2020 Commons Chamber

[Dame Margaret Hodge]

I entirely support the hon. Member on that.

Netflix takes out of the public purse more than it contributes in corporation tax. While Her Majesty’s Revenue and Customs fails to collect money from it in corporation tax, the US Government is extracting tax from the same profits that it earns here and then hides in unknown tax havens.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I congratulate my right hon. Friend on securing the debate. While austerity has seen billions of pounds taken out of our public services, with £300 million gone from the economy in Newcastle, is it not absolutely vital that we get this tax policy right so that we have that money to fund our vital public services? Multinationals such as Netflix should make their fair contribution.

[Dame Margaret Hodge]

Not only should they be making their fair contribution, but they use the services that other people’s tax pays for.

Netflix creates its content here, supported by grants that it receives here through our tax credit system, yet it pays tax on the profit that it makes here in the USA. Frankly, I say to the Minister: you couldn’t make it up. The situation is scandalous, intolerable and unfair. It is the sort of behaviour that really winds up the British public, most of whom are law-abiding taxpayers who never try to avoid their duty to pay taxes.

Let me explain the Netflix situation in detail. Netflix is the world’s biggest video-streaming service, with 167 million subscribers. The California-based company is the online home of popular shows such as “The Crown” and “House of Cards” and films such as “Marriage Story” and “The Irishman”, but while we all binge-watch Olivia Colman’s portrayal of the Queen Netflix has deliberately constructed a devious financial structure that has no other purpose than to avoid paying its tax.

The Netflix strategy is to be the biggest player in the online video streaming market, to buy out or undercut any rivals and to release a sea of content to attract a truly global subscriber base. For many years, the service ran at a loss to secure this dominant market position, but it is now operating in the black. Netflix’s global operating profit rose by an enormous 61% last year to £2 billion. By 2019, Netflix had 11.62 million UK subscribers, who generated a £1.08 billion income for the company, but under the ruse it employs any UK citizen who subscribes to Netflix is billed not in the UK but from a subsidiary company in the Netherlands.

The most recently published Netflix accounts for 2018—the only earnings declared here—amount to a very small proportion of its billion-dollar UK revenue. Money declared by Netflix in the UK is paid by the Dutch subsidiary to a much smaller subsidiary based in Britain, which makes up just a trivial proportion of the services the company provides. Tax Watch UK estimates that the actual profit Netflix made in the UK was close to £70 million in 2018, so the company should have paid over £13 million in corporation tax.

Tax Avoidance and Evasion

Debate between Baroness Hodge of Barking and Catherine McKinnell

Tuesday 14th November 2017 Commons Chamber

[Dame Margaret Hodge]

If the hon. Lady looks at the HMRC figure on the tax gap, which is about £34 billion to £36 billion, and then at the figure that tax campaigners talk about, which is a gap of £120 billion, I think she will share my determination to see much more action to deal with this ill in our society.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I congratulate my right hon. Friend on securing this debate. Does she share my concern about the complacency being shown today? Cutting down on global tax abuse clearly requires international co-operation. As we exit the EU, does she share my concern that this ambition not be damaged by our exit but be strengthened by our actions domestically and internationally?

[Dame Margaret Hodge]

I completely concur with my hon. Friend’s important remarks.

It is our job, as the elected representatives of those who are angry, to do what we can to put a stop to tax injustice. Tax avoidance should be not an issue that divides us, but one on which we work together in the interests of all taxpayers and in order to protect our public services. The Paradise papers are the latest in a series of leaks unmasked by the international press. I salute the professional investigatory journalists involved in making sense of the millions of documents passed to them, especially those at The Guardian and on “Panorama”, who have been working on the papers for a year, and I salute the public-spirited courage of the whistleblower who first passed the papers to the German newspaper, the Süddeutsche Zeitung. The Paradise papers contain 13.4 million files from just two offshore providers of tax advice and the company registries of 19 tax havens. The scale of the data is what makes the leaks so important.

We have had the Panama papers, the Luxembourg leaks, the Falciani leaks, the so-called Russian and Azerbaijani laundromat revelations on money laundering, and now we have the Paradise papers. We will continue to see new leaks splashed over our papers and filling our television screens until the Government act firmly to clamp down on the avoidance that is so blatant and yet so wrong.