Formula 1 could face a European Commission tax investigation after it emerged this weekend that it had avoided paying at least $500 million (USD) in tax over the past decade through clever practices.
A report in The Mail on Sunday revealed that F1’s companies paid just $6.5 million in corporation tax – on profits of $463.6 million from revenue of $1.7 billion.
This is a tax rate of just 3.3 percent – nearly eight times lower than businesses are supposed to pay.
It is claimed F1’s companies achieved this through the legitimate practice of transfer pricing – which is something global groups like Amazon and Apple have also done to minimise tax payments.
It is achieved through companies paying millions of pounds of interest in loans to offshore company counterparts – which effectively gives them a loss on paper and a smaller tax bill.
While the practice remains legal for now – that did not stop the EC imposing a mammoth €13 billion fine on Apple earlier this year for transfer pricing in Ireland.
The EC argued that the tax break Apple had got in Ireland was tantamount to illegal state aid.
EC competition commissioner Margrethe Vestager said at the time: “Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules.”
The EC has refused to rule out the possibility of a similar investigation being launched against F1.
The Mail on Sunday quoted a spokesman as saying: “We cannot speculate on any possible future investigations on tax state aid cases.”