Skinning The Netflix Scapegoat

For those of you who read the recent Sunday Times’ shock horror revelation of NetFlix not paying any UK corporation tax against estimated earnings of £200 million last year, save your righteous indignation for those who’ve actually broken the law.

The spin on this one is dizzying.

While the synchronicity of social media sentiment is somewhat expected, there’s a curious raft of communal short-term memory lapse and oxygen-starved logic among a lot of folks who simply should know better. 

This is a means-to-an-end game.

First, the Exchequer has for a long time staunchly defended the Treasury’s use of experts from “big four” accountancy firms Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers, rejecting criticism from the Commons Public Accounts Committee that such staff could be “poacher turned gamekeeper turned poacher” by thereafter representing private sector clients.

And so it continues.

Translation: The big four help inform policy in practice. They know how the system works and how to work the system. 

And who is NetFlix’s accountancy firm? Once it was KPMG, now it’s Ernst & Young.

Go figure.

The message: Hire yourself a big four firm.

But don’t lay the blame on their doorsteps. The big bad wolf has a few stops yet before arriving at the brick house that can’t be blown down. 

Consider the company’s approximately 2,000 employees, who now enjoy perks like unlimited maternity and paternity leave during the first year after the child’s birth or adoption, and the importance of companies of Netflix’s ilk with wage, employee tax contributions and spending power to government, supplier businesses and local communities.

That’s a big nickle.

And in an age of tax inversion in America –  the relocation of a corporation’s legal domicile to a lower-tax nation – Britain looks as enticing as the once Celtic tiger economy of Ireland with its circa 10% corporation tax of the 1990s, but with an added perk.

That UK corporation tax band appears highly “flexible” to those larger businesses deemed important enough to qualify for a behind closed doors chat in Whitehall and sweetheart tax deal a la Starbucks.

And they are not alone. Mondelez, the company that owns Cadbury, is also alleged to have paid zero UK corporation tax last year.

But that will change, albeit slowly.

Lure’em in first. Then tighten the policy until the balance between paying more and not leaving the UK’s shores is achieved.

By example (and comparison), Starbucks is now looking downright generous in paying £8.1 million in corporation tax this year – about the same as it paid in the first decade or so operating in Britain.

So you may now want to reconsider where you lay your blame in light of a broader understanding of how this game works.

Or you can continue to take to the social airwaves and cry foul at your leisure over missing tax from big “evil” corporates, the girth of fat cat pay cheques and how unfair the world is.

The only balance forthcoming is between employment and foreign direct investment, and the tax breaks it takes to push those numbers to an unemotional economic parity.

The rest is just a whinge in the wind.

 

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