Feeds

Firm-Who-Must-Not-Be-Named's tax dodge profit shift? Totally legit

Multinationals can 'choose where their profits are based'

Secure remote control for conventional and virtual desktops

HMRC chief exec Lin Homer admitted yesterday that there was little the tax authority could do to stop big firms like Amazon, Google, Facebook and Starbucks moving their profits abroad to avoid tax.

Homer told MPs on the Public Accounts Committee that it was up to multinationals where they were headquartered and where certain parts of their business were.

“All HMRC can do is to apply the laws and what I am acknowledging is that in an international setting, multinational businesses can choose to some extent where some parts of their business are based and they can choose where some of their profits are based,” she said.

But just as she was defending UK policy on tax evasion, Chancellor George Osborne was releasing a joint statement with German Finance Minister Wolfgang Schäuble calling for international action to strengthen tax standards.

Major multinationals have been accused of declaring UK profits in other countries where tax rates are lower and using artificially high costs, like royalties for intellectual property or brand franchises, to reflect a lack of profit in Britain. Starbucks has paid no corporation tax in the UK for the last three years while Apple is paying less than 2 per cent tax on all its overseas profit.

The committee called Homer and some of her HMRC colleagues to face questioning and explain how international companies were getting away with paying so little.

Members of the committee pushed Homer to address more specific examples without naming names, since Starbucks, Amazon and Google have been invited to make their own cases in front of the same committee.

Conservative MP Richard Bacon said that people could understand the cost of coffee, the price of sandwiches, how much rent is and the cost of employees, but they couldn't understand how those costs cancelled out all profits.

Homer tried to answer Bacon with an example about scientific intellectual property but he demanded a more relevant example. Homer insisted however that IP was IP.

"One of the interesting challenges, is that if the IP that we're talking about in the area we're talking about - coffee and sandwiches - wasn't worth anything, people wouldn't pay for it, it's a market-led value," she said.

But Labour MP Margaret Hodge, chairing the committee, countered that if KFC and McDonald's paid UK tax, "the one we're not allowed to talk about" should too.

Homer said it was up to the committee to talk to individual companies about their specific tax issues.

It wasn't just one company they were talking about, Hodge pointed out, but a whole list of international firms including Intel, Kraft, Ikea, Coca-Cola and Asda. She accused HMRC of being unable to get enough information out of companies to assess whether they were avoiding tax or not.

But Homer stuck to her guns, saying once again that HMRC could only follow the law and that the international firms could choose where to base their business.

However, Chancellor George Osborne was saying at the same time that Britain and Germany wanted to strengthen international standards for corporate tax regimes.

"International tax standards have had difficulty keeping up with changes in global business practices, such as the development of e-commerce in commercial activities," the joint statement said. "As a result, some multi-national businesses are able to shift the taxation of their profits away from the jurisdictions where they are being generated, thus minimising their tax payments compared to smaller, less international companies."

Osborne and Schäuble said they'd called on their G20 colleagues to back the Organisation for Economic Co-operation and Development in looking for gaps in current standards "as a first step" to a "better way of dealing with profit shifting and erosion of the corporate tax base at the global level".

Recent financial results from Google, Starbucks, Amazon, Apple and Facebook have caused public outcry about how foreign companies invited to do business in Britain appear to evade taxes while their local competitors pay up.

The Public Accounts Committee has called on Google, Starbucks and Amazon to appear before it next Monday for questioning, although it's still unclear which representatives of the companies will be answering the summons. ®

Beginner's guide to SSL certificates

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Sysadmin with EBOLA? Gartner's issued advice to debug your biz
Start hoarding cleaning supplies, analyst firm says, and assume your team will scatter
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
Don't bother telling people if you lose their data, say Euro bods
You read that right – with the proviso that it's encrypted
Apple SILENCES Bose, YANKS headphones from stores
The, er, Beats go on after noise-cancelling spat
prev story

Whitepapers

Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.