Despite having about 4.5m subscribers in the UK, Netflix paid no corporation tax in 2014. According to reports, the service generated about £200m of revenue in the UK in 2014 but any profits from the United Kingdom last year were booked overseas. The investigation doesn’t suggest that the company has broken the law. Netflix features award-winning series like Orange is the New Black or House of Cards and sells its subscription for a minimum of £5.99 a month.
According to reports, Luxembourg-based Netflix International BV showed a net turnover of £415m and profits of £11.3m last year, and UK subscribers made up most of turnover. Netflix paid income tax in Luxembourg at a rate of about 5%. In response, the service explained that it was in “expansion” mode, suffering overall losses on its international operation. Neflix said its British subsidiary employs only a dozen people and will pay some corporation tax in 2015, assuring the investigators that the company fully complies with all applicable rules. Earlier this year, it was reported that despite accounting for over 65m subscriptions worldwide, the cost of 3rd-party content on the service was $7.7bn, about 4.6 times its net revenue.
The United Kingdom is estimated to be Netflix’s biggest market outside the United States, where it accounts for over 40m subscribers. The industry watchers predict the number of UK subscribers to reach 9.5m by the end of the decade. In the meantime, Netflix has been facing increasing competition from rivals like Amazon, Hulu and HBO in the United States. As for the United Kingdom, Neflix considers Amazon Prime to be its closest rival in this country.