Google, Amazon and Starbucks attacked for hiding UK profits by PAC

Google, Amazon and Starbucks attacked for hiding UK profits by PAC

In an exchange with a committee of MPs, Google, Amazon and Starbucks were accused of siphoning off hundreds of millions of pounds in UK profits.

As reported yesterday, the Public Affairs Committee (PAC), which is responsible for government financial affairs, invited senior executives from those companies to explain the minuscule amounts of tax they have paid in the UK in recent years.

Google’s head of northern European operations Matt Brittin was questioned by MPs over figures showing that the firm only paid £3.4 million tax in 2011, despite earning a 33 per cent profit margin on £2.5 billion of in the UK last year.

Google is accused of avoiding UK tax by channelling non-US sales via a subsidiary in Ireland, meaning it can pay taxes at a rate of 3.2 per cent. Brittin defended Google’s tax practices saying it operated from countries like Ireland and Bermuda because they offer attractive tax rates.

“Like any company you play by the rules and manage costs efficiently to offer fair value to shareholders,” he said.

Chairman of the PAC and Labour MP Margaret Hodge condemned Google’s defence, labelling it “immoral”.

“We’re not accusing you of being illegal, we are accusing you of being immoral,” said Hodge.

Hodge also told the executives that UK taxpayers are increasingly angry at the use of tax havens by US multinationals trading in Britain.

“People want to know why companies which benefit from an infrastructure paid for by them and are paying people low wages who receive taxpayer-funded tax credits from the exchequer are not paying their fair share,” she said.

Amazon’s director of public policy, Andrew Cecil, was also lambasted after the PAC described the director as being “deliberately evasive” and displaying “outrageous” ignorance after he failed to explain how much profit is generated in Britain.

It was revealed that Amazon uses a Luxembourg-based unit to allow it to pay just 11 per cent tax on foreign profits – considerably less than Britain’s 24 per cent corporate tax rate. The online retailer paid less than £1 million in income tax last year even though it had UK sales worth up to £4.5 billion.

Early today, French authorities demanded that Amazon pay £159 million in unpaid taxes dating back to 2006 – a claim which the Internet giant disputes.

Starbucks CFO Troy Alstead was questioned over why the world’s largest coffee chain has only paid £8.6 million in total UK tax over 13 years during which it recorded sales of £3.1 billion. Alstead’s claims that the coffee shop is not making a profit in Britain were quickly dismissed by the committee when it emerged that Starbucks’ Swiss division charged a 20 per cent premium on coffee it sells to its UK arm.

“Why can’t you pass on the benefits to the UK by not overcharging for coffee or billing inflated rates of interest?” asked Hodge.

“This is the most competitive market in the world. Respectfully I can assure you there is no tax avoidance here,” replied Alstead, who pledged the company would pay more tax once it became more profitable.

All three companies have been asked to supply further information to the committee. Meanwhile, another Amazon executive will be asked to appear before the group of MPs in two weeks’ time after Hodge branded Cecil as not a “serious person” who talked “utter nonsense”.

Image Credit: YouTube (Mark Stothard)

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