UK lawmakers call for tax crackdown on corporates

  • Reuters, London
  • |
  • Updated: Dec 03, 2012 08:18 IST

A committee of UK lawmakers has called on government to crack down on multinational companies that make substantial sales in Britain but pay little tax here echoing demands from leaders across Europe for measures to tackle corporate tax avoidance.

The Public Accounts Committee (PAC) said on Monday the government should set down rules limiting inter-company transactions that reduce companies  tax bills  push for more transparency in company reporting on tax and work with other countries to limit profit-shifting across borders.

"Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax here. This is outrageous and an insult to British businesses and individuals who pay their fair share " said Margaret Hodge  who chairs the PAC.

The committee  which is charged with monitoring government financial affairs  also criticised the UK taxman  Her Majesty s Revenue & Customs  (HMRC)  for being "too passive" with big companies.

"Lenient treatment is given to big corporations  of which almost half have a head office overseas " the PAC said in its report on HMRC s annual accounts.

Last month the PAC grilled executives from Starbucks Google and Amazon over why they paid little tax in the UK while taking in billions of pounds in revenues.

The committee said it found the evidence it received was "unconvincing  and in some cases evasive".

Starbucks said it had always complied with UK tax law but revealed on Sunday that  in response to the public outcry around its tax arrangements  it was looking at changing these.

Amazon said it complied with the tax rules  but declined to comment on the committee s findings. Google declined to comment.

The recent UK focus on tax avoidance follows a Reuters investigation into Starbucks that showed it paid no UK corporation tax in the past three years and had told investors it was profitable while reporting big losses to the UK taxman.

Hot Potato
With governments across Europe running big budget deficits due to the financial crisis and global economic slowdown  tax avoidance has moved to the top of the political agenda.

Tax campaigners and groups opposed to austerity measures have pushed the UK government to lean more heavily on big businesses to close the budget gap.

However  even some big UK businesses are taking exception to the way some of their rivals paying much lower tax rates.

In recent weeks  senior executives from department store and grocery chain John Lewis and from WM Morrison Supermarkets have called for a level playing field on tax between domestic businesses and multinational rivals such as Amazon.

Amazon pays little income tax in the UK because it channels UK sales through Luxembourg  which offers some of the lowest effective tax rates in Europe.

The committee acknowledged such concerns.

"We are concerned that multinationals have an unfair competitive advantage over British businesses which have no choice but to pay their corporation tax " the PAC report said.

The French government said last month that it was discussing new measures to tax internet companies such as Amazon and Google  which minimises its tax bill by booking sales through an Irish subsidiary.

British Finance Minister George Osborne announced last month that he had teamed up with his German counterpart to lead a push in the Group of 20 economic powers to make multinational companies pay their "fair share" of taxes.

However  in a separate report released on Monday  charity War on Want said Osborne s plans to enact a new anti-tax avoidance law next year would have no impact in reducing the kinds of tax reduction techniques employed by Amazon  Google and Starbucks.

Unions and tax campaigners have already criticised the planned General Anti-Abuse Rule for being too narrowly targeted.


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