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Google and Amazon to be quizzed by UK government over alleged tax avoidance

BusinessNews
, 12 Nov 2012News
 Google and Amazon to be quizzed by UK government over alleged tax avoidance

The UK government will quiz executives from Google, Amazon and Starbucks amidst mounting concerns that the US multinational firms have been dodging taxes.

According to Reuters, the Public Accounts Committee (PAC), which is responsible for government financial affairs, has invited the companies to explain the minuscule amounts of tax they have paid in recent years.

The committee confirmed it would be summoning Starbucks CFO Tory Alstead, Google CEO Matt Brittin and Amazon Director of Public Policy Andrew Cecil to give evidence.

The news follows last week's announcements by Britain and Germany that they would push the G20 to ensure that multinational companies pay their "fair share" of taxes, following numerous reports of large firms exploiting loopholes to avoid coughing up the necessary impost.

Figures reported by Reuters show that Google, the world's largest search engine, only paid £3.4 million tax in 2011, despite earning a 33 per cent profit margin on £2.5 billion of sales in the UK last year.

Meanwhile, Amazon paid less than £1 million in income tax last year even though it had UK sales worth up to £4.5 billion.

Both companies are thought to avoid UK tax by channelling non-US sales through a third country. Google has a subsidiary in Ireland, for instance, meaning it can pay taxes at a rate of 3.2 per cent, while Amazon uses a Luxembourg-based outlet to allow it to pay just 11 per cent tax on foreign profits - considerably less than Britain's 24 per cent corporate tax rate.

Starbucks has also come under fire in the UK for paying £8.6 million of tax over 13 years, during which it recorded sales of £3.1 billion. Online marketplace giant eBay is an even bigger miser, allegedly dodging over £50 million in tax via a similar legal tax haven scheme.

Margaret Hodge, Chairman of the PAC and Labour MP, said there was growing public and political concern over big companies dodging tax in the UK, especially when the country is facing austerity measures over its huge budget deficits.

"It is hard for the ordinary person to believe it's fair. It makes people incredibly angry in the current fiscal climate," she said.

Both Google and Amazon have remained tight-lipped on the matter but Starbucks said it followed the tax rules in every country where it operates and sought to pay its fair share of taxes.

"We are committed to being transparent on this issue and look forward to appearing before this committee," a spokeswoman said.

Other US tech giants like Apple have also been criticised for paying tiny amounts of tax on big profits - just last week, it was revealed that the iconic iPhone manufacturer paid only 2 per cent on its profits outside the US.

According to Reuters, Hodge and former financial services minister Paul Myners said that the government should consider a new revenue-based tax to ensure companies coughed up remunerations on all profits from UK sales.

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