Etsy facing renewed pressure over Irish tax strategy

Call to strip company of transparency standards certification

Late last year, Etsy reorganised that Irish unit as an unlimited liability company. Photo: Getty Images

Late last year, Etsy reorganised that Irish unit as an unlimited liability company. Photo: Getty Images

 

A tax policy advocacy group called for online retailer Etsy to be stripped of a certification awarded to companies that adhere to strict standards for transparency and social accountability unless it dismantles its offshore tax cutting structure.

Last month, it was reported that Etsy – a company that promised to set an example for its level of transparency – reorganised its Irish subsidiary in a way that conceals its tax- cutting arrangements from public view.

 Americans for Tax Fairness wrote to B Lab, the non-profit organisation that determines the B Corporation certification for socially responsible companies, arguing that Etsy’s tax arrangement should disqualify it for the designation.

Etsy is undergoing a recertification with B Lab, which is required after the company offered shares to the public and includes an assessment of its impact on the community, environment and employees.

The New York-based online marketplace must also complete a public disclosure questionnaire that asks about tax avoidance.

“Etsy’s tax dodge is standard operating procedure among our country’s giant multinational corporations,” wrote Frank Clemente, executive director of Americans for Tax Fairness, a Washington-based non-profit group which advocates that big companies and wealthy individuals pay their fair share in taxes. “We hope it will not be acceptable as a B Corp. standard. Therefore, we respectfully ask that B Lab make Etsy’s B Corp designation contingent upon its elimination of the use of its subsidiary in Ireland to dodge taxes.”

In June, the group published a report on Wal-Mart Stores’s network of offshore tax havens.

“We have a tax structure that reflects our growing international business and our values,” Etsy said in an e-mailed statement. “It’s a straightforward structure that meets our tax obligations and allows us to invest in services for our Etsy community.”

Like many big multinational companies, Etsy uses an Irish subsidiary to manage its tax bill. Late last year, Etsy reorganised that Irish unit as an unlimited liability company. Under Irish law, that means it no longer has to make public the financial results of that subsidiary.

“We file our tax returns and pay our taxes in many states and countries, but we don’t publish those filings for everyone to read,” Chad Dickerson, Etsy’s chief executive officer, wrote in a blog post.

  B Lab hasn’t completed reviewing Etsy’s recertification application and couldn’t provide additional information until the process is complete, said Andrew Kassoy, a co-founder of B Lab.

“As a standards organisation, we appreciate public engagement on our work and take their letter seriously. In fact, we welcome the questions,” Mr Kassoy said in an e-mail. “Like many issues related to the conduct of business, corporate tax loopholes are both important and controversial, and therefore they require a formal process to arrive at a good answer.” – Bloomberg