Parliament forces Netflix to respond to TaxWatch research

by | Sep 24, 2020

Netflix has agreed to respond to TaxWatch’s investigation into the company’s tax affairs after a request from the Digital, Culture, Media and Sport (DCMS) Committee. Our report revealed that the TV giant had streamed up to $430m of profits into offshore tax havens in 2018 (we have since published a follow up blog post taking into account 2019 figures). This research into Netflix’s tax affairs has previously been the subject of an adjournment debate in the House of Commons.

The DCMS are currently holding an inquiry into ‘The future of public service broadcasting’, and on Tuesday 15 September held a formal meeting in which senior Netflix executives Benjamin King, Director of Public Policy UK and Ireland, and Anne Mensah, Vice President of Original series, participated.

During the oral evidence session the Labour MP for Cardiff West, Kevin Brennan, put our report to Mr King, in saying:

the revenues from subscribers in the UK in 2018 for Netflix was £860 million, yet Netflix pays very little tax in the UK because that money is credited to a Dutch company….What is your response to that issue about the way in which Netflix is structured allegedly to avoid paying tax in the UK?

Mr King responded:

I would like to start by emphasising that we do pay all the tax that is required of us under UK law and every other jurisdiction that we operate in. Our accounts from 2018, which is our most recently published set, showed that the operating profit we made across our entities at that time was offset under HMRC’s group relief regime rules by the losses that we made on certain of our productions.

Mr King went on to say that because Netflix’s European Headquarters is in the Netherlands, profits from the UK “are taxed in the Netherlands, which is completely in accordance with international norms”.

Mr Brennan asked if there was any truth to the allegation that Netflix is intending to take advantage of High End TV Tax Relief in the UK while not paying any profit here. Mr King responded that there were “a great many inaccuracies” and “false assertions in the TaxWatch report that we noted at the time of publication”, to which Mr Brennan questioned why Netflix did not respond to TaxWatch’s initial request for comment prior to publication.

Mr King stated that “we were not consulted on the detail of the calculations”.

As TaxWatch has now set out in a letter to Mr King, this is incorrect. TaxWatch contacted Netflix posing a number of questions that arose out of our investigation, while setting out in detail our calculations and research in advance of the publication of our first report in January 2020. We made it clear that we were contacting Netflix to allow for the opportunity to raise any factual issues and to provide a comment in advance of publication.

In a subsequent phone call with a representative of Netflix, TaxWatch’s Executive Director George Turner made it clear that we would be happy to correct any inaccuracies in advance of publication if Netflix provided us with the disputed details.

We were assured we would receive a full response to our request for comment, however, after several days of no further contact, Netflix told us that the company had decided not to respond.

For that reason we were surprised to see the claims made about our research at the committee hearing.

Mr Brennan pointed out that Netflix were given an opportunity to respond, and asked if Mr King wished to make a comment during the committee proceedings. Mr King stated that he did not have TaxWatch’s report in front of him, and repeated the claim that there are “certainly a great many inaccuracies in the report”. When pressed further he agreed that Netflix would provide a written response.

We have since re-sent our report and initial correspondence to King in order to assist with Netflix’s response to the DCMS.

A transcript of the session is available here, with video footage is available here. Reference to TaxWatch’s research begins at 1059hrs.

This story was reported in Deadline.

Photo by cottonbro from Pexels.

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