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Multinationals given roasting by PAC

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As reported in Tax Journal last week, representatives of several US multinational companies appeared before the Commons Public Accounts Committee on Monday afternoon, to take questions from MPs on their corporate tax arrangements.


MPs alleged that Amazon structures its operations through Luxembourg to enable it to pay corporation tax at a rate of under 12% on foreign profits, and wondered why, when a UK customer buys books from a UK website, is billed in the UK and where the books will be delivered from UK centres, tax is paid in Luxembourg.

As reported by the  Financial Tim es (12 November) Andrew Cecil, Amaz on’s director of public policy, said that sales on ‘were actually made by [Amazon’s] European business, which is based in Luxembourg and employs 500 people. Amazon's UK business, which employs about 15,000 people, operates as a service provider.’

Cecil reminded the Committee that the company does actually pay corporation tax, and also millions of pounds in payroll taxes and business rates, but that he did not have information that the PAC had requested on the group’s structure including how much profit is generated in the UK. Margaret Hodge, Committee Chair said, ‘Your entire business is here but you pay no tax here and that really riles us,’ and that Amazon would be recalled to answer further questions later this month.


Key issues for the Committee surrounded royalty payments made by the UK operation to a regional headquarters in Amsterdam under a confidential arrangement with the Dutch tax authorities, loan arrangements between the UK business and other divisions, and the supply of coffee beans via Switzerland which were sold out to subsidiary companies at a 20% mark-up.

Chief Financial Officer, Troy Alstead, reported that Starbucks was simply not profitable in the UK, having focussed its activity mainly on London where rental costs were particularly high. Starbucks UK had made a profit in only one of the last 15 years. Coffee beans were roasted in the Netherlands, explaining the company’s presence there, although Alstead commented that the tax arrangements there were ‘attractive’.

In response to being told that the company spends $500m on research and development annually, Stuart Jackson MP commented, ‘It's a cup of coffee, it's not an internal combustion engine ... the generic coffee-making process is not that difficult.’


Mark Brittin, chief executive of Google UK admitted that the company has bases in Ireland and Bermuda in order to take advantage of low corporate tax rates, but pointed out that, ‘We pay all the tax we are required to pay.’

Brittin reported that Google develops the technology that is at the heart of its business in California, where it has 17,000 engineers.