David Farnor | On 21, Dec 2015

Labour have criticised UK Chancellor George Osborne, as a new report emerges saying that Netflix paid zero corporation tax in the UK last year.

The VOD giant has around 70 million subscribers worldwide, each paying a monthly fee. With 40 million customers in the US, the UK is its biggest overseas market. Subscription fees, though, were paid to Netflix International BV, which was based in Luxembourg, meaning that it paid no corporation tax in the UK in 2014 – a lawful move, but one that places the streaming company alongside other large multinational corporations not contributing to the British economy. According to The Sunday Times’ report, Netflix’s British subsidiary, Netflix Services UK, received an income tax credit of around £35,000.

Netflix has repeatedly insisted in its reports to shareholders that the company is still growing. Indeed, the company plans to be fully global in the near future, an expansion strategy that costs big bucks, not just for marketing in each new territory, but for costly rights to third-party titles. Its original stable, meanwhile, is also getting bigger, leaving the company gambling on a loss-operating model until it can balance the books.

Nonetheless, The Sunday Times, which analysed the company’s reports, says Netflix earned an estimated £200 million of revenue in Britain in 2014 with 5 million subscribers.

Labour’s Shadow Treasury Minister, Richard Burgon, called for the Chancellor to “get a grip”.

“George Osborne needs to get a grip of this issue in the new year as after being Chancellor for five years he has no-one else left to blame but himself,” he told the press.

“Many families will be paying to sit down together this Christmas to watch programmes on Netflix and won’t expect that the money they give may be undermining British businesses. It’s the businesses and taxpayers who pay their taxes who have to carry the burden for those who do not.

“This only further makes George Osborne’s decision to close 153 tax offices at HMRC look like another mistake from a Chancellor who, only last month, was shown over the police and tax credit u-turns to cut first and think later.”

However, Netflix was only based Luxembourg until the end of last year, which means that the company expects to pay some tax for 2015.

A spokesman commented: “HMRC is clear that multinational companies must pay the tax that is due and we do not settle for less.

“The Government has led the way in taking action to ensure multinational companies pay their fair share of taxes, including introducing the diverted profits tax to make it harder for multinationals to divert profits out of the UK.

“We have also played a critical role in the OECD’s project to reform the international corporate tax system to prevent tax avoidance.”

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