Despite its promise to be a “beacon for transparency,” online crafts marketplace Etsy has created an offshore tax haven that is shielded from public scrutiny, Bloomberg reports.
Etsy’s Irish subsidiary is now classified as an unlimited liability company so it no longer has to report publicly how much money is being moved through Ireland or the amount of tax it will pay.
The strategy “shrouds [Etsy’s] offshore tax-cutting arrangements in secrecy,” Bloomberg said.
The use of unlimited liability companies has risen 18% since 2009, according to Irish corporate data, while the total number of Irish companies rose just 4%.
“The main advantage of unlimited liability companies is nondisclosure,” Jim Stewart, an associate professor of finance at Trinity College’s school of business in Dublin, told Bloomberg. “If companies are not disclosing, you have to ask why not? Is it to hide things that they’d feel embarrassed about?”
Etsy is trying to grow its business outside of the U.S., which now accounts for about 30% of gross merchandise sales. It denies that it is using the Irish subsidiary as a tax dodge.
“As we continue to grow and expand our international business, we are generating an increasing amount of revenue and intellectual property outside of the U.S.,” Etsy told Bloomberg in an e-mailed statement. “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.”
The company declined to answer specific questions about its tax planning,. But before it’s initial public offering in April, Etsy said transparency was one of its central values.
“As a public company, we will be able to provide a higher level of transparency and accountability to a broader number of people,” CEO Chad Dickerson said in a letter to prospective public investors. “If we succeed, then other companies might replicate our model. We think the world will be a better place for it.”