MPS have accused Starbucks, Google and Amazon of “imorally” minimising their UK tax bills in a damning report looking at why the corporation tax paid by the trio is so low.
Starbucks said yesterday it was looking at its “tax approach” in the UK after coming under fire for paying no corporation tax in the country in the past three years. But Westminster’s public accounts committee report criticises the companies for the “unconvincing and, in some cases, evasive” evidence they gave for the reasons behind their low tax payments.
MPs concluded a number of multi-nationals were exploiting laws to move offshore profits clearly generated in the UK – and urged the government to “get a grip”.
The committee’s report accuses HM Revenue and Customs (HMRC) of being too lenient in the way it dealt with big-name firms, which it said were “getting away with” paying little or no corporation tax.
Committee chairwoman Margaret Hodge said: “Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax. This is outrageous, and an insult to British businesses and individuals who pay their fair share.”
A section of the report looks into tax avoidance by multi-national companies and reveals a drop of £6.3 billion in corporation tax revenue last year. MPs say they were not convinced by HMRC’s assertion that it pursues all tax due from big businesses.
The report highlights “genuine public anger and frustration” that rigorous action is taken against UK companies but that “apparently lenient treatment” is given to big corporations – of which half had their head offices abroad.
Starbucks told MPs it made a loss for 14 of the 15 years it has operated in the UK, making just a small profit in 2006, its chief financial officer, Troy Alstead, told the committee.
But the MPs concluded this was “inconsistent” with claims made by the coffee giant that its UK business was successful and it was making 15 per cent of its profits here.
The report tells how Starbucks agreed it had special tax arrangements in the Netherlands which the Dutch authorities had asked the company to “hold in confidence”, and that “Switzerland offers a very competitive tax rate”.
It also reveals Starbucks has as an inter-company loan between its US and UK business, which the MPs said had an interest rate set at a higher rate than any similar loan it had seen. The report concludes: “We suspect that all these arrangements are devices to remove profits from the UK to these areas with lower tax”.
According to a news agency investigation, Starbucks generated £398 million in UK sales last year, but did not pay any corporation tax.
MPs also rounded on Amazon, saying its representative was “evasive and unprepared to answer legitimate questions”.
While the company had a UK operation involving 15,000 staff, it pays little corporation tax in the UK, the report found.
It said the company’s UK website reported a turnover of £207m for 2011 but its tax expense was just £1.8 million.
The report said Google, which has 1,300 UK staff, accepted profits should be taxed in the countries where they are generated but “undermined its own argument” because it remits its non-US profits – including from the UK – to Bermuda, which has an advantageous tax regime. It told how most of Google’s non-US sales are billed to Ireland and revealed that in the UK, Google Ltd recorded revenues of £396m in 2011 but only paid £6m coporation tax.
The report says: “All three companies accepted profits should be taxed in the countries where the economic activity that drives those profits, takes place and that, alongside their duty to their shareholders, they had obligations to the society, from which they derive their profits, which included paying tax.
“However, we were not convinced that their actions, in using the letter of tax laws both nationally and internationally to immorally minimise their tax obligations, are defensible.”
Mrs Hodge called for companies that abused the system to be “named and shamed” and urged the government to toughen up legislation.