We have all watched with interest this week the investigations into Amazon, Starbucks and Google all taking ever increasing shares in UK sales yet contributing little if anything in corporation tax.
Not that they are alone in this. Facebook apparently only managed to contribute £238,000 in tax last year to the UK coffers, eBay only £1.2m and Apple less than two per cent on profits made outside the US.
Amazon, Google and Starbucks all faced a grilling, but took very different routes on their responses.
Google was represented by their UK head to have their dirty washing laundered. The company admits to making good use of European tax jurisdictions. Their base is the Republic of Ireland to service its 200 plus UK customers buying their advertising space. Matt Brittin, managing director of Google UK & Ireland, defended his company bullishly, pointing out the many UK based engineers and marketing consultants. He was open about the choice of Ireland’s 12.5 per cent corporation tax. It all sounded very plausible but it is the figures that make us wince. The poor old Treasury reportedly saw only £6m of their £395m turnover of the UK operations. That makes a lot of extra burgers and guinness for Google.
Starbucks took a different approach and pleaded poverty, which didn’t sit too well with the Committee, who found it to be a little bit of a stretch. The tax advantages of having chosen their Dutch headquarters, the committee was told, was just a lucky side bonus to the coffee roasting plant site that decided them.
The Dutch government’s special tax deals were a mere lucky coincidence. Their representative, Mr Alstrom attempted a mournful look remarking, “We are not at all pleased about our financial performance here,” which claims to have only once made a profit in 15 trading years.
Amazon’s dealings look a lot more shady altogether – especially when we learn that the company has already set aside £229m to pay extra taxes from investigations from several other national tax authorities.
However, it was Amazon’s own director of public policy, Mr Andrew Cecil who really fuelled the fire against the company with his hugely evasive answers to the enquiry. He mysteriously failed to have with him the Bar confirming that they did find Luxembourg head quarters tax advantageous. This included, somewhat incredibly the rather relevant value of their UK sales, not to mention their pre-tax profits. Estimates for this are around £3.3bn sales in the UK last year to absolutely no paid corporation tax. No wonder we Brits are objecting somewhat.
Our lovely HMRC speaks loudly and defensively, saying that their Large Business Service challenges the risk to the UK losing out. The truth though is that governments are reluctant to address these particular issues because it would counteract our open door policy to businesses that provide jobs within the UK. I very much doubt that this is for any more ethical reasons, but also based on financial ones of reducing our unemployment benefits, not to mention the good PR of reducing the jobless figures. No surprises there.
What worries me, however is the incredibly naivety of Margaret Hodge, who chaired the parliamentary committee. This problem is far from being a new one, after all – companies have been doing legal tax avoidance moves since time and memorial from Jersey to the Cayman Islands. Nor is there anything new in running one subsidiary at a loss for tax purposes. I think it’s safe to say that one would be hard pushed to find any multi-national corporation with a blameless moral record in any department.
Yet she appeared to hope to appeal to their consciences, remarking hopefully, “We’re not accusing you of being illegal, we’re accusing you of being immoral.” I can see this making them change their ways.
Subsequently, Hodge told the BBC that she thought it was right for customers to boycott the three companies. Well, I am sorry, but I cannot for one moment, in this age of austerity, believe that Mr and Mrs Joe Bloggs will be banning themselves from Google or not purchasing goods at cheaper prices from Amazon.
If this is the best we can come up with, perhaps we should be looking at cutting spending on such ridiculous efforts and saving money that way.
Jan Cavelle is founder of the Jan Cavelle Furniture Company.
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