'Facebook and eBay need to be subject to greater scrutiny' - Margaret Hodge
Parliamentary committee needed to make global businesses accountable
Former chair of the Public Accounts Committee Margaret Hodge has renewed calls for greater transparency of global companies' tax affairs - following revelations of Facebook and eBay's recent tax affairs.
Companies House filings revealed this week that Facebook's UK business generated an £11.3m tax credit last year while reporting a £4.2m tax charge for 2015. Meanwhile eBay paid just £1.1m in tax in the UK last year, despite telling US investors that Britain was its second largest market, generating revenues of $1.4bn (£1.1bn).
Speaking to The Register, Hodge said: “As long as the tax affairs of these global, multinational companies are confidential, we will never know whether it is a sweetheart deal, or whether they have been treated the same as a small high street enterprise struggling to survive and that is being constantly pursued by the tax man.
The most controversial example of companies appearing to negotiate tax deals with the government behind closed doors was the £130m settlement with Google last year. The PAC has said it is not possible to judge whether the £130m in back taxes deal - owed since 2005 and which took six years to agree - was a fair deal for taxpayers.
"I have always said we have to find a way through this. And I can’t see that the world would fall apart if FTSE 100 companies were forced to disclose the tax they pay and how that sum was arrived at, so we could see if it was fair."
An alternative route would be to create a confidential Parliamentary committee tasked with holding companies to account, similar to the way the Intelligence and Security Committee operates with the security services.
"So it could ask to look at the Facebook papers or the eBay papers, and then it could satisfy itself in confidence that HMRC was treating them equally fairly.”
HMRC also needs to do more, she says. “It is under-resourced. And I think it isn't aggressive enough; they are not assertive enough on behalf of the UK taxpayer. They don’t take enough cases to court and they don’t challenge enough."
Hodge believes one of her most important pieces of work in last five years was to shine a light on the issue of taxation - an issue she has also been accused of grandstanding over.
But she says a huge amount of money is at stake, with HMRC having admitted it has a tax gap of £34bn, while tax campaigners have pegged that figure to be closer to £120bn.
“Even if it is somewhere in the middle, we are talking about mega bucks that [are] lost, at a time when people are struggling to pay their bills and services are being cut, [which] is unacceptable."
She added: "It is undoubtedly true that global corporations, big companies and very rich individuals take advantage of advice offered by a huge industry of accountants, banks and lawyers to deliberately arrange their financial affairs to no other purpose than to avoid paying their fair share of tax."
It is also up to the government to simplify the" incredibly complex” tax system and “get rid of a lot of these ridiculous tax reliefs, because every tax relief becomes an opportunity to do tax avoidance".
“[However] companies need to show a little bit of ethical behaviour and if companies don’t their reputation is damaged.”
Hodge believes Theresa May will be to preoccupied with Brexit to push for greater tax transparency. But she is keen to push the agenda from the back benches via the All-Party Parliamentary Taxation group she created last year.
"I won’t let the agenda go, I am going to be pursuing it with colleagues across political parities. Because I think it really matters to the British people that we have a tax system that is fair and is seen to be fair.”
The group will also look at how Brexit will impact the tax revenue. "There was a tendency under the coalition government and the early day of the conservative government to use tax as a competitive tool - so they are in effect creating tax haven conditions here in the UK, which I think is deeply worrying and highly unacceptable so we will be able to analyse that and talk about that. And stimulate public interest in the issue.” ®
Called to Account: How Corporate Bad Behaviour and Government Waste Combine to Cost us Millions by Margaret Hodge is published by Little Brown Book Group with a cover price of £18.99.