Amazon, Starbucks & Google tax responses
As expected Amazon, Starbucks and Google were quizzed by MPs today at the Commons Select Committee meeting. Max Brittin of Google openly admitted that being based in Ireland was because of the low Irish 12.5% Corporation tax compared to the UK rate of 24%.
Starbucks have a particularly complex setup with 4.7% (previously 6%) in royalties being skimmed off to the Netherlands and a 20% markup on coffee paid to their Swiss operation. It can easily be argued that if Starbucks kept that 26% revenue in the UK they’d be paying a reasonable chunk of corporation tax.
Amazon got a bigger roasting than any Starbucks coffee bean has ever been subjected to. Amazon, like eBay, have never revealed revenues and profits by country and so came unprepared without the figures to give to MPs. Amazon’s Andrew Cecil repeated the mantra that he would have to come back the MPs and see if the figures could be disclosed. I do feel some sympathy for Amazon here, eBay also don’t break out figures by country and whilst MPs can demand the information it is commercially sensitive.
Unlike eBay however, who provide a service (and let’s not forget the EU has been banging on about how we should be able to source services from any EU country just as easily as from the UK), Amazon are also a retailer. There’s a good argument that if a product is shipped from a UK warehouse to a UK consumer that the profits should be held within the UK.
It’s also worth remembering that whilst they may pay little in corporation tax, these same companies also pay £100s of millions in payroll taxes and business rates. However, it’s also notable that Amazon just received a $252 million bill from the French tax collectors, which Amazon have said they intend to dispute.
What’s unquestionable is that all three companies are paying all the taxes due, it’s just that much of the tax is paid outside the UK. Several companies have been named and shamed in the press for paying little corporation tax in the UK including eBay and Facebook and it would be wrong to turn today’s Public Accounts Committee meeting into a witch hunt purely against the high profile companies named in the press. There are numerous other businesses who use the same tactics.
If the government wants companies to pay corporation tax in the UK for business functions performed for UK businesses and consumers there needs to be an even handed change in the law which applies to all international companies operating in the UK.
Whether this is even possible under EU law isn’t a question we at Tamebay are qualified to answer. If the UK gains more taxes then other EU countries like Ireland and Luxembourg will have correspondingly lose tax income. Equally, are there UK companies paying UK corporation tax which could be lost if other countries start insisting they also pay tax in the territories they operate in?
Whichever way you look at it, it appears morally wrong that large companies pay little tax in the UK, whilst British small businesses using services from the likes of Amazon, Google and eBay pay much higher percentages to the Exchequer. It will be interesting to see what the Public Accounts Committee conclusions are and how tax law changes in the coming years. What seems clear is that there is a public appetite to clamp down on big corporations avoiding tax through such practices.
If these companies are working within the law they have every right to do what they do.
What makes me laugh is when members of the public bang on about how it is not far, when if they had the oppotunity to pay less tax within the law they would! Everyone would pay less tax if they could, if they say they wouldn’t I think they would by lying!
The focus should be put more on rooting our benefit cheats, people who do a lot of ‘cash’ jobs and getting long term unemployed back into work.
Chasing big companies will just cost us all more in the end!
Stuart, i agree with most of what you say but one thing i completey DISAGREE with you about is “rooting out benefit cheats”. Yes, of course any illegal activity should be rooted out but theres far more money going to waste and even being illegally spent by our very own MP’s in Goverment. These are people on £50,000+ a year and yet they abuse their expenses in the tune of tens of thousands, all this is illegal, shouldnt we be rooting THEM out instead of focusing all on attention on poor people who do benefit cheating in order to earn an extra pound? I hate when poor people, such as the unemployed, are used as the scape goat and yet the well off and the rich get an easy ride. Absolutey disgraceful.
I understand your point about MP’s however £50k a year is not a lot for the amount of abuse they receive and time they spend on their jobs, also living in London on that wage wouldn’t be much fun.
With regards to benefits, I think there is a lot of money wasted here, big time and this is our money that we could get back.
Any pressure on these big companies will just mean we pay more money in one way or another.
The things that need to be tackled are things that are already paid for by the tax payer, one big one would be the NHS!! That sadly sucks the country dry of money!
They should be dealing with both. There is no logical reason why not. But your point is well made.
For me the issue is simply you and I make up the shortfall in what they fail to pay, legally or not. I don’t like it and I will be using them less and less until they correct it. I no longer use Starbucks. I don’t use Amazon at all. My next phone will not be an Android. And so on. There is plenty we can do to make our disaproval known. We just need to do it and they will get the message. Wonder what tax they pay next year…. maybe they will have made a profit?
There are lots of barely related subjects being thrown into the discussion here.
These loopholes bleeding wealth from the UK need to be closed. If you want there to be money in the coffers to educate your children etc…
We dont want Amazon paying anymore tax, because they will start putting their fees up!
Let me get this straight. You don’t mind Amazon or other Foreign Companies operating in ways that may break the Law of the UK or indeed the EU because if caught and found to be breaking the Law they may have to pay their Legitimate Tax and possibly Penalties and Fines. You reason being that if they are investigated and caught breaking the Law they may put their fees up.
However if they are caught and Fined the monies that they may have to pay over to the Treasury may mean that the Chancellor might not have to raise tax for the rest of us and may have some money to play with in schemes to increase employment or whatever.
Don’t you realise that part of the reason why some of the massive usually American Companies have grown so huge so quickly is because they have evaded Legitimate Tax which the rest of us have to pay.
Many years ago the Americans prosecuted Al Capone for Tax Evasion. Perhaps the same technique should be employed now against any companies that are using the same techniques.
“Many years ago the Americans prosecuted Al Capone for Tax Evasion.”
Big difference between evasion and avoidance, I thought you used to be an accountant?
I did used to be an Accountant in Industry. However it is possible for a Large Multi National Corporation to use both Tax Avoidance and Tax Evasion to minimise their total tax bill. After all within a Large Multi National Corporation there may very well be many millions of pounds of Tax that they might be expected to pay and they may very well need more than one way to minimise their tax bill. After all if the Chancellor was to plug one dubious scheme its always nice to have two or three or even more ways available to minimise the tax.
For a wealthy Private Individual one or two schemes may be adequate for their needs. However again its a case of “not putting all your eggs in one basket”
Just as there is a ‘star’ system for hotels, food hygiene ratings displayed prominently in front of food outlets, and the (V) symbol for food that is free from meat, there should be some kind of mark or symbol that rate companies for their taxation practices. If it was compulsory, it might actually give an incentive to cool down on their tax avoidance practices, however legal.
There is a huge difference between, doing business with the rest of the EU whilst being based in the UK (where you also do a big chunk of business) and doing business with the rest of the EU, whilst being based in Luxembourg, where you only employ a couple of ‘token’ staff members and the odd cleaner. The latter is purely, 100%, done for tax avoidance purposes and this is the type of structure that needs to be discouraged.
Yes, go on, rate Amazon, and put out of business all the independent traders who use it as a platform.
And then do it to Ebay too.
It is highly unlikely that Amazon, ebay, google or Starbucks will go out of business if they are hammered by the Tax Authorities in the various countries. It is also unlikely that they will put up their fees.
To start with the Directors of the various Multi National Companies knew that it was only a matter of time before the Tax Authorities in the various Countries would get very interested.
The HMRC is always interested in people who are trading and not paying the right amount of Tax. It does not matter if you are a back street Garage or a Local Window Washer sometime HMRC will show interest in your activities. It may not be this year or next but sometime and then they have the statuatory powers to go back years especially if they consider that there is deliberate fraud.
Obviously the bigger and more profitable you are the quicker it will be before you come to their attention. However while the back street garage may not be able to afford a battery of high power Accountants and Lawyers the like of Amazon, ebay, google etc can.
But at the end of the day they will get caught. The back taxes, interest and fines will be enormous but Amazon and the rest of them expected to get caught sometime. However it is likely that Amazon etc know exactly how much they have evaded over the years. The HMRC will no doubt launch raids to sieze computers and financial records but it is unlikely that they will find everything. Then there will be negotiations lasting months or even years with a final figure agreed which even though it will be enormous could still be less than Amazon, ebay and the rest know that they have evaded over the years. So the HMRC will claim a massive success and Amazon, ebay and the rest will still be quids in.
The business of Amazon, ebay and the rest will still continue. So will the businesses of all the small traders etc who sell on Amazon etc.
In regard to the fees they will continue to go up as they always have but Commercial reasons will be paramount in their decisions not the Back Taxes, Interest and Fines which they already expect to have to pay sometime(even if they will try to stall it as long as possible).
Here’s more on the French tax bill for Amazon: http://www.dailymail.co.uk/news/article-2232304/France-demands-160million-unpaid-tax-internet-giant-Amazon.html?ito=feeds-newsxml
I wonder if the UK government will go after all the Asian sellers who are not in the UK but sells lots of there products there via online sites??????
That’s an interesting point DD. I think whereas the multinational can be said to be resident in the country by way of its significant presence,Suzie Wong is obviously resident in her own country.
The problem is its a grey area, there are 1000’s of sellers with Websites and online sales into the UK who are not based in the UK
Are HMRC going to be chasing all the Far East Sellers????
Morality shouldn’t come into tax, only law. Our government should stop complaining it is skint and change the LAW.
It’s embarrassing they even had this event. Positively as pathetic as telling energy companies to be nice to their customers or they will scowl at them. They won’t change the law because then so many members of government would have to pay more.
I personally have no problem with the government challenging the Integrity of business. Just because an action is legal doesn’t mean that it is not dishonest.
“They won’t change the law because then so many members of government would have to pay more.”
Its not that, their CEO friends will stop letting them have a few weeks on their yacht and they might actually have to pay for a meal out every now and again :P
Oh and as for the cost of running a political party…