Etsy's B Corp Status Challenged by Tax Group Over Irish Haven

  • Americans for Tax Fairness says Etsy seeking to avoid taxes
  • Etsy says its fiscal structure meets all of its obligations

A tax policy advocacy group called for online retailer Etsy Inc. to be stripped of a certification awarded to companies that adhere to strict standards for transparency and social accountability unless it dismantles its offshore tax-cutting structure.

Etsy, a company that promised to set an example for its level of transparency, reorganized its Irish subsidiary in a way that conceals its tax-cutting arrangements from public view, Bloomberg News reported last month. Americans for Tax Fairness wrote to B Lab, the nonprofit organization that determines the B Corporation certification for socially responsible companies, arguing that Etsy’s tax arrangement should disqualify it for the designation.

Etsy is undergoing a recertification with B Lab, which is required after the company offered shares to the public and includes an assessment of its impact on the community, environment and employees. The Brooklyn, New York-based online marketplace must also complete a public disclosure questionnaire that asks about tax avoidance.

“Etsy’s tax dodge is standard operating procedure among our country’s giant multinational corporations,” wrote Frank Clemente, executive director of Americans for Tax Fairness, a Washington-based nonprofit group which advocates that big companies and wealthy individuals pay their fair share in taxes. “We hope it will not be acceptable as a B Corp. standard. Therefore, we respectfully ask that B Lab make Etsy’s B Corp. designation contingent upon its elimination of the use of its subsidiary in Ireland to dodge taxes.”

Advocacy Group

Americans for Tax Fairness, which was started in 2012, has lobbied on a variety of issues, including maintaining the estate tax and opposing a tax holiday for companies that have stashed profits in offshore tax havens. In June, the group published a report on Wal-Mart Stores Inc.’s network of offshore tax havens. It receives most of its funding from foundations, including the Ford Foundation and Open Society Foundations. The group is also funded by public-sector unions, including the American Federation of State, County and Municipal Employees and the National Education Association.

“We have a tax structure that reflects our growing international business and our values,” Etsy said in an e-mailed statement. “It’s a straightforward structure that meets our tax obligations and allows us to invest in services for our Etsy community.”

Like many big multinational companies, Etsy uses an Irish subsidiary to manage its tax bill. Late last year, Etsy reorganized that Irish unit as an unlimited liability company. Under Irish law, that means it no longer has to make public the financial results of that subsidiary.

"We file our tax returns and pay our taxes in many states and countries, but we don’t publish those filings for everyone to read," Chad Dickerson, Etsy’s chief executive officer, wrote in a blog post

Recertification

B Lab hasn’t completed reviewing Etsy’s recertification application and couldn’t provide additional information until the process is complete, said Andrew Kassoy, a co-founder of B Lab.

"As a standards organization, we appreciate public engagement on our work and take their letter seriously. In fact, we welcome the questions," Kassoy said in an e-mail. "Like many issues related to the conduct of business, corporate tax loopholes are both important and controversial, and therefore they require a formal process to arrive at a good answer."

(A previous version of this story was corrected to show that comments from an Etsy blog were from CEO Chad Dickerson.)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE