Google, Amazon, Starbucks are 'immoral' and 'ridiculous' over UK tax
'We don't make any money here' insists milkbar bigwig
MPs didn't shrink from telling senior execs from Amazon, Starbucks and Google that they were "ridiculous", "unbelievable" and "immoral" about their UK taxes.
Under questioning from the Public Accounts Committee, Andrew Cecil, the director of public policy for Amazon, tried to claim that he had no idea what sales were made in Britain alone because European sales were taken as a whole. Cecil also said that the Luxembourg-based headquarters for Amazon EU S.a.r.L. was owned by a holding company but couldn't explain why that was necessary or who then owned that holding company.
The committee said that Amazon.co.uk gave every impression of being a British firm, books that were ordered from the site came through the Royal Mail, from a UK fulfilment warehouse that billed the person, but somehow taxes ended up being paid in Luxembourg, where the rate is less than the UK's.
But Cecil said that some taxes were paid in Britain by Amazon UK Ltd, the company that ran the fulfilment centres in the country, among other jobs. He said that Amazon paid £1.8m in corporation tax on over £200m turnover in 2011. He also said that Amazon EU S.a.r.L. turned over €9.1bn, but somehow only made a profit of €20m.
The MPs said that they weren't against internet shopping, most of them were happy customers of Amazon, but they just couldn't understand how the figures worked out the way did.
"I'm a satisfied customer," Austin Mitchell, Labour MP, said. "I love those emails you send asking me if I want that biography of John Major or Fifty Shades of Grey… [but] your business is here, your customers are here."
Cecil stuck with the same answer to almost every question, protesting "We're a pan-European company!" at least five times.
The MPs in the committee were increasingly exasperated at what they termed "evasive" and "ridiculous" answers.
"You've come with nothing!" Labour MP Margaret Hodge exclaimed after Cecil once again said he didn't have the answer to a question with him. "We will have to order a serious person to appear before us and answer our questions."
Google VP for sales and operations in Northern and Central Europe, Matt Brittin, was refreshingly blunt by comparison, admitting that Google's European operations were set up in Ireland because its corporation tax was just 12.5 per cent versus 20 to 24 per cent in the UK.
He said Ireland also offered a skilled workforce since tech companies like Intel and Microsoft were already in the country but one reason to set up there was the favourable tax rate.
When Hodge asked why Ireland paid money on to the Netherlands, Brittin said that was no longer "necessary" but admitted it was a setup that used to help the company out with tax. He also admitted to having operations in tax haven Bermuda, which he claimed were to hold intellectual property rights outside the US.
Google was invented in America, you know
Brittin's big schtick was to insist that Google was a US company, that Californian innovation came up with the computer science behind the firm's products and so ultimately the profits should go back to the US.
"I wish Google had been invented in Cambridge, I really do," he said.
But the MPs pointed out that the money that ended up in Bermuda wasn't getting back to the US.
"What advantage are your shareholders getting from that money?" Hodge asked.
Brittin also insisted that Google paid all the tax in the UK that it legally owed. Its filings show £2.5bn of UK sales in 2011 but tax of just £3.4m.
"We're not accusing you of being illegal, we're accusing you of being immoral," Hodge retorted.
Starbucks, which has paid £8.6m of tax over 13 years when it had sales of £3.1bn, also faced a grilling from the MPs. Troy Alstead, the firm's chief financial officer, said the company had never made a profit in the UK, a claim the committee was not happy with.
"I'll have to run out right now to Victoria Street and buy a double caramel macchiato, you're doing so badly," Mitchell said sarcastically. "You're either running the business very badly or there's some fiddle on."
The committee wanted to know where the UK money was going if not into profit. Alstead said that the shops paid a royalty rate of six per cent to Starbucks in the Netherlands where the firm has its European HQ and a roastery.
The MPs accused him of manufacturing that rate to move British profits out of the country, a charge Alstead denied, saying that many stores around the world paid the same rate.
When he was asked how much tax the coffee chain was paying in the Netherlands, he refused to say, claiming Dutch authorities wanted that to stay confidential. The committee said that the deal must be a "sweetheart" one if Starbucks and the Dutch tax authorities didn't want to reveal it.
Alstead also talked about buying expensive coffee beans in Swiss trading markets that were then sold on to its shops in the UK. He admitted a 20 per cent markup was put on the already pricey beans. The effective tax rate on the trading companies in Switzerland can be as little as five per cent.
Aside from the tiny amount of tax it has managed to pay in the UK, Starbucks is in the soup for telling analysts in a conference call in 2009 that the UK business was profitable and the firm saying in 2008 that Britain was one of the foreign markets with the best profit margins. It then reported British losses for both years.
All three companies have been asked to give more information to the committee than they were wiling to give publicly. Another executive from Amazon could be called before the MPs in the next two weeks. ®