On Monday, lawmakers questioned the three business goliaths’ key executives on how exactly they managed to pay so little tax while making billions on the British market.
“We are not accusing you of being illegal,” Public Accounts Committee chairman Margaret Hodge said as quoted by The Telegraph, “we are accusing you of being immoral.”
It has turned out that Starbucks has paid no corporate tax in the UK in the last three years. The coffee chain paid only £8.6 million (US$10.8 million) in total tax to the UK government over 14 years. It has also been disclosed that Starbucks signed a secret deal in the Netherlands in order to pay a discounted tax rate there. The company maintains its European headquarters in Amsterdam, where it employs 220 people, compared with 6,500 in the UK – which raises questions about where its economic activity is really concentrated.
Meanwhile, in response Starbucks denied the allegations, with its finance chief Troy Alstead saying the company has been making no money in Britain, yet vowing to pay more taxes once it became more profitable.
Amazon, the UK’s biggest online retailer, was accused of “manipulating profits” by Labour MP Fiona MacTaggart, who claimed the company was deliberately structuring its UK arm “to make it pretend that it is just warehousing.” The company employs 15,000, with its warehouses in the UK, but drives all of its sales through Luxembourg. “Your entire business is here but you pay no tax here, and that really riles us,” said Hodge, as quoted by The Telegraph.
Google was accused of paying only an effective 0.4 per cent tax rate in the UK, compared with 21 per cent paid globally. Conservative MP Charlie Elphicke stressed that Google’s tax charge in Britain was only £3.4 million (US$ 5.4 million) out of declared earnings of £2.5 billion.
“Billions of tax revenues are being lost to the UK. It’s clear from today that international tax avoidance is being conducted on an industrial scale. This is not just unfair on hardworking, honest UK taxpayers. It gives overseas companies an unfair competitive advantage over UK companies. That’s bad for our economic growth,” Elphicke said.
“The tax abuse can be stopped. We can tighten UK tax presence rules, we can stop the ‘expenses’ used to cut business tax bills in the UK, and we should refuse government contracts for companies that don’t pay a fair share of tax in the UK.”
Lord Myner, the former City minister, said large international companies took in massive amounts of money in the UK but ensured they made no profits by carrying out large payments to offshore companies, as corporate tax is only paid on profit.
The fact that the American giants leeched off the system in the UK has provoked public concern in the wake of the austerity measures implemented to make up for large budget shortfalls in Britain and Europe at large.