Vince Cable accuses global giants of ‘systematic’ dodging of UK tax laws

The Liberal Democrat minister said he did not know whether cafe giant Starbucks, one of the companies at the centre of growing controversy over payment avoidance, was making a loss on its UK operation – which was the reason it gave for paying little or no corporation tax.

The coffee chain was one of several multinationals which endured an uncomfortable grilling by MPs last week amid mounting anger over the use of overseas bases and other tactics to avoid paying British tax.

Mr Cable warned that while the UK had to entice global  giants for the investment they brought, more should be done to crack down on tax “dodging” by major corporations.

“We need inward investment and we need companies coming from all over the world, so we need to make this an attractive place,” he said.

“But while they are here, if they make profits, they should pay tax on their profits. There is nothing more galling to small and medium-sized companies that pay their tax to the British government and we find these people dodging it.

“Our own tax authorities have got to be very tough on things like royalty payments, which is where a lot of the subterfuge takes place.”

Mr Cable added that it was “completely unacceptable where there is systematic abuse taking place”, while admitting that it was tough to get to the bottom of the often complex operations.

“It is quite difficult to drill down to what the problems are. Starbucks claims they are actually making losses in the UK.  I don’t know whether they are not, but you would need some pretty intensive investigation by the Inland Revenue to establish what exactly is going on, whether their transfer prices and royalties are being fiddled or not.”

Smaller businesses were “very angry” at the “appalling story of abuse of company taxation”, the Business Secretary said.

“You have got to have a combination of action at an international level, which the Chancellor is pursuing with other countries – which are just as angry as we are about the way the system is being  fiddled – and we’ve got to beef up our own capacity to crack down on tax abuse here.”

Mr Cable’s comments came as yet more firms were accused of avoiding paying tax. Another coffee chain, Caffe Nero, was reportedly found to have paid no corporation tax in Britain for the past two years, despite making profits of more than £36 million during that time.

Meanwhile, private equity firms linked to the AA national breakdown service also came under fire for paying minimal corporation tax, it was reported.

Politicians and unions condemned the AA’s holding company, Acromas, for paying just 2.7 per cent tax on profits since it was established in 2007.