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eBay’s Legal Fumble Leads to Questions over Tax Claims

What started as a story in January about allegations of fraud made by eBay against several employees in Australia has turned embarrassing for eBay as the legal drama unfolds.

In January, The Australian newspaper reported that eBay filed a lawsuit against its former manager of ad operations in Australia Glen Gaunt along with two of his associates. eBay alleged the employees had falsified ad revenue and pocketed the difference.

However, the affidavits eBay submitted into court raise questions about its own tax affairs, according to the latest coverage by the Sydney Morning Herald newspaper. “eBay is alleging breach of fiduciary duty by Gaunt, who was a sales manager with the company. But they can’t decide to whom he actually owes this purported fiduciary duty.”

Gaunt joined eBay Australia and New Zealand in 2007, which bore the advertising expenses, “Yet the fruits of his labour were all booked, like those of his colleagues, straight to the Swiss entity,” the newspaper said, referring to eBay International Advertising Gmbh, which it says is the destination for all the revenue eBay makes from its ad sales in Australia. That would reduce the taxes eBay would owe in Australia.

The newspaper rhetorically asks Australian tax authorities if it is legal “to stuff all your costs into an Australian company while siphoning all your profits from exactly the same sales activities offshore.” While noting that most multinationals do it, “eBay is clumsily blatant,” it writes, continuing:

“In fact (eBay’s) overlords in Switzerland and the US must be wondering what those knucklehead Aussies are up to. They even account for GST in their pleadings when eBay doesn’t even collect GST.

“Moreover, in a burst of legal schizophrenia, eBay listed three plaintiffs in its lawsuit: eBay Australia and New Zealand Ltd, eBay International AG and eBay International Advertising GmbH (added later).”

The newspaper also questioned the relationship between eBay and one of the defendant’s banks, accusing the bank of violating the former employee’s privacy and making things onerous for her in the wake of a difficult pregnancy.

The Sydney Morning Herald said eBay Australia paid $381,641 in tax while disclosing revenues of $39.7 million. Other companies are also being scrutinized over their international corporate structures designed to minimize their tax liabilities.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.