Etsy Inc., the popular marketplace for artisan goods, is making moves to ensure its offshore tax cutting set-up remains a secret. The Brooklyn, New York based company recently took advantage of some laws in Ireland by designating their Irish subsidiary as an unlimited liability company, a tactic often used by big internet companies.
The company that once claimed to be a forerunner for business transparency has now successfully found a loophole allowing them to keep basic financial information private from the public eye.
With this transition, Etsy joins a long list of companies including LinkedIn Corp. and Google Inc. that are able to shroud the shift of their profits to tax-free locations such as Isle of Man or Bermuda.
To take advantage of this loophole offered in Ireland, Etsy simply rerouted a majority of its revenue through its Irish subsidiary. The company announced that any users outside of the US would enter into the terms of agreement not with the parent company but with Etsy Ireland.
Nondisclosure is the primary objective that companies such as Etsy and Google Inc. are achieving when making the move to an unlimited liability company. Under this new moniker, these companies don’t have to publically disclose financial information such as income statements or balance sheets.
With the number of companies taking advantage of this scheme increasing at an alarming rate, 18 percent since 2009, consumers should start asking themselves why companies feel the need to conceal such information.
In an e-mailed statement, Etsy justified their change in tax structure by citing the “increasing amount of revenue and intellectual property outside of the US.” The company stated, “After careful consideration and consultation, we have evolved our tax structure to accurately account for the value of that property. We pay taxes at the local rate and make all required filings in the jurisdictions in which we operate.”
Right now, Ireland’s laws provide a sort of tax shelter for these companies allowing them to keep their tax information private. This activity usually involves moving revenue to offshore, tax-free locations. Ireland announced that the laws allowing this tax shelter would gradually be abolished. In the meantime, Etsy and similar companies are enjoying the benefits of greater privacy and lower taxes while their consumers are kept in the dark.