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MPs denounce multinationals over ‘immoral’ tax avoidance

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George Osborne is set to announce extra investment in HMRC to bolster the department’s efforts to tackle tax avoidance by multinational companies, after MPs called on the government to ‘get a grip’ on large companies generating significant income in the UK but paying ‘little or no tax’.

More on this story:

HMRC needs a change in mindset to tackle tax avoidance, say MPs

Amazon disclosed sales of £3.35bn ‘from the UK’

Google ‘undermined its own argument’ in defending tax arrangements, say MPs

Starbucks reviews UK tax arrangements

Taxing the multinationals: Companies need to embrace transparency, says KPMG

Taxing the multinationals: We need a balanced international debate, say lawyers

Margaret Hodge, chairman of the Commons public accounts committee (PAC), said it was ‘outrageous and an insult to British businesses and individuals who pay their fair share’ that global companies generating significant income in the UK were ‘getting away with paying little or no corporation tax here’. The PAC’s report on HMRC’s latest accounts was published today.

Hodge said evidence given to the PAC last month by senior executives from Amazon, Google and Starbucks about the companies’ UK corporation tax bills was ‘unconvincing and in some cases evasive’.

Yesterday the chancellor told the BBC’s Andrew Marr that he would announce additional funding for the part of HMRC that deals with the tax affairs of large companies. Work at an international level to tackle avoidance would also be ‘a big priority’ for the G7/8 summits to be hosted by the UK next year. But he warned that ‘we can’t tackle this by pricing ourselves out of the world economy’.

‘We want companies to come to Britain,’ Osborne said. Having a competitive tax system would enable companies to ‘feel that they don’t have to locate somewhere else’.

Osborne was speaking hours before publication of the PAC report, which was highly critical of tax arrangements at Amazon, Google and Starbucks. ‘All three companies accepted that 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,’ the PAC said.

‘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. They all accepted that the perceived ethical behaviour of corporations could affect consumer behaviour. Being more transparent about their business practices, including paying their fair share of taxes, was becoming an increasingly important issue to their customers.’

The PAC said its intention in inviting the three companies to give evidence was ‘to provide an illustration of what we perceive to be a wider problem of possible corporation tax avoidance; not to single out Amazon, Google and Starbucks as the only companies engaging in these practices’.

Starbucks said yesterday that it recognised that it needs to do more to ‘build public trust’, and it was in talks with HMRC and HM Treasury about its tax affairs.

The PAC called on HMRC to be more ‘aggressive and assertive’ in confronting avoidance. Witnesses had ‘lacked clarity’ when trying to explain HMRC’s approach to enforcing the corporation tax regime, it said.

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