Foreign firms face tax crackdown in U.K. and Europe

**Panda** Thu 25 Oct - 10:51

Foreign firms face tax crackdown in UK and Europe

Foreign companies face a tax crackdown as David Cameron demanded an investigation into claims of large-scale avoidance while Brussels moved to close European VAT loop-holes enjoyed by Amazon, Skype and Netflix.

Foreign firms face tax crackdown in U.K. and Europe Amazon-alamy_2060041b

Foreign firms face tax crackdown in U.K. and Europe Amazon-alamy_2060041b

Amazon, which is based in Luxembourg and owns Kindle, has a big advantage over UK based retailers such as Waterstones which has to charge VAT at 20pc. Photo: Alamy

By Louise Armitstead, Chief Business Correspondent

6:39PM BST 24 Oct 2012

Foreign firms face tax crackdown in U.K. and Europe Comments

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The Prime Minister said HM Revenue & Customs should “look carefully” at cases where international corporations have legally been able to pay no corporation tax - or very small amounts - on billions of pounds of UK revenue.

Asked by MPs if it was “morally wrong” for big companies like Starbucks and Apple to avoid paying tax, he said he was “not happy” and companies should pay “fair taxes.”

“This is an international problem that all countries are struggling with, about how to make sure that companies pay tax in an appropriate way,” he told the House of Commons. “I am not happy with the current situation. I think the HMRC needs to look at it very carefully. We do need to make sure we are encouraging these businesses to invest in our country, as they are, but they should be paying fair taxes as well.”

Separately, George Osborne claimed a victory after Brussels reacted to his complaints about low rates of VAT in Luxembourg and France. The European Commission said it had given both France and Luxembourg 30 days to raise the VAT rate on ebooks to 15pc. In January, the rate was cut to 3pc in Luxembourg and 7pc in France amid a scramble to attract and retain international media companies. The EC said the moves were “incompatible with current rules” and were “creating a serious distortion of competition to the disadvantage of operators in the 25 other Member States of the Union.”

It added: “The two Member States have one month in which to bring their legislation into compliance with EU law. Otherwise, the Commission may refer the matter to the European Court of Justice.”

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Notice how once again Cameron has proved reactive, not proactive "meanwhile Brussels moved to close European VAT loop-holes enjoyed by Amazon, Skype "

**Panda** Sat 3 Nov - 9:35

By Helia Ebrahimi

8:34PM GMT 02 Nov 2012

139 Comments

HM Revenue & Customs has identified £25bn of unpaid taxes that may have been wrongly withheld by corporations, of which almost 44pc are overseas companies, according to Pinsent Masons, the tax specialists.

The research comes ahead of an appearance next week by Lin Homer, the HMRC chief executive, in front of MPs over how effective the taxman has been in collecting money from large foreign corporations.

International companies such as Google, Facebook, Amazon and Starbucks have sparked controversy after it emerged that they all pay minimal tax on large UK revenues.

Although these firms follow UK law, there are concerns that such giant corporations are using accounting strategies to divert profits earned in Britain to their parent companies or to lower tax jurisdictions, via royalty and service payments, or by so-called transfer pricing.

Starbucks has paid no corporation tax in Britain for the past three years, while Amazon, Facebook and Google have together paid less than £30m of tax despite sales of £3.1bn over the past four years.

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Margaret Hodge, chairman of the Public Affairs Committee, which will quiz Ms Homer on Monday, told The Daily Telegraph that the behaviour of some companies was “immoral” and that it wasn’t clear if HMRC was doing enough to make sure companies didn’t get away with it. The PAC has demanded that Google, Amazon and Starbucks attend a separate hearing the following week to defend their records.

“There is a growing anger among ordinary people who pay their taxes that the system is not fair,” said Ms Hodge. “It may be legal but it is not moral.”

Charlie Elphicke, a Conservative MP and former tax lawyer, has called for a radical change in corporate behaviour and an end to company bosses “playing the system”.

According to Mr Elphicke, 19 US-owned multinationals are paying an effective tax rate of 3pc on British profits, instead of the standard rate of 26pc. The key to this is called transfer pricing. This can involve a parent company charging its regional divisions a royalty fee for its brand name and corporate marketing benefits, with the payments being transferred directly to the head office.

In other firms, the brand name, trademarks or research and development services are registered not in the UK, but in another country with lower tax rates such Luxembourg or Ireland. This has the effect of magnifying profits in the lower tax jurisdiction and minimising them in the UK.

“We want to try and find out whether people are being treated equally and fairly under the law,” said Ms Hodge. “I’m not sure HMRC is doing all it can to make sure every penny due comes in.”

David Cameron has said HMRC should “look carefully” at cases where international corporations have legally been able to pay no corporation tax – or very small amounts – on billions of pounds of UK revenue.

**Panda** Tue 13 Nov - 8:47

Magnificent Margaret' Sends Amazon Packing
The chair of the Public Accounts Committee puts on a 'formidable' display when quizzing Amazon, Google and Starbucks executives.

11:29pm UK, Monday 12 November 2012
Foreign firms face tax crackdown in U.K. and Europe Evs-xtaccess-2012-10-30-111-a-01h00m07s08-1-522x293

Foreign firms face tax crackdown in U.K. and Europe Evs-xtaccess-2012-10-30-111-a-01h00m07s08-1-522x293

Ms Hodge was in fine form

Jon Craig

Chief Political Correspondent

More from Jon | Follow Jon on Twitter

What do buying a cup of coffee, internet shopping, paying the gas bill and filling up the family car with petrol have in common?

We’re all getting ripped off when we do any of these, MPs have been hearing on a day at Westminster dominated by allegations of corporate fat cats creaming money off taxpayers and consumers.

Firstly, executives from Google, Starbucks and Amazon were accused by MPs of “immoral” tax avoidance during a three-hour verbal roasting by the Public Accounts Committee, led by the formidable Margaret Hodge.

She told the hapless Troy Alstead of Starbucks she couldn’t tell the difference between the various brands of coffee. But she certainly appeared to have been fired up by a few powerful double espressos!

But it was the hopelessly unconvincing Andrew Cecil of Amazon who was really sent packing by the magnificent Margaret. He must have wished he was stuffing boxes in one of Amazon’s “fulfilment centres”, as he called them. That’s warehouses to you and me.

Secondly, as MPs were about to debate Labour’s Commons motion to scrap the 3p fuel duty increase due in January, came allegations that gas companies are rigging energy markets, pushing up prices for millions of consumers.

Energy Secretary Ed Davey, who is to make a Commons statement on Tuesday, declared: "I am extremely concerned about these allegations and will be keeping in close touch with the regulators while they get to the bottom of this."

Labour, not surprisingly, is blaming the Government. "For months Labour has said that customers are getting a raw deal and the gas and electricity companies should be forced to sell the energy they generate into a pool, to open up the market and ensure fairer consumer prices,” said the Shadow Energy Secretary, Caroline Flint.

And thirdly, the fuel duty showdown engineered by Labour with the aim of sparking another Tory rebellion and Government defeat. But Labour’s move - like a car with a dodgy fuel pump - backfired.

The fuel tax rebel leader, Tory MP Robert Halfon, declared himself satisfied with Treasury assurances that Chancellor George Osborne would cancel the increase in his December 5 Autumn Statement and that was that.

“I know some will call for a further freeze in fuel duty today,” new Treasury Minister Sajid Javid told MPs. “I can assure them this Government understands the financial pressures hard-working families are facing.

"Subject to the constraints of the public finances, this Government is determined to help families with the cost of living."

Calling off the rebels, Mr Halfon said he believed the Government was “in serious listening mode” and said: "I believe it is perfectly sensible and right to wait for the Autumn Statement, given the Government's record, given that they cut fuel duty last year and given that they have stopped two fuel duty rises.

"The Treasury team has done more to cut fuel prices than Labour did in a decade. You don't have to work at Bletchley Park to read the signals that the Treasury is sending out about giving help with the cost of living.”

The Government won the vote by 282 votes to 234, a commanding majority of 48.

But scrapping the 3p fuel increase is easy politics for the Chancellor.

Tackling the tax avoidance loopholes exploited by Google, Starbucks and Amazon and the gas price rigging being investigated by Ofgem and the Financial Services Authority will be much harder.

The Chancellor’s allies tell me, however, that he is making some progress in coming down hard on big international companies who split their business to take advantage of low tax rates in certain countries to avoid tax in countries where taxes are higher.

At a recent G20 finance ministers’ meeting, he reached an agreement with Germany’s finance minister that he hopes will be a start.

But there’s a long way to go and it’s a problem that will take longer to solve than pleasing Tory backbenchers on fuel duty.

**Panda** Wed 28 Nov - 10:37

Google UK boss Matt Brittin fights back over tax payments

Google's boss in Britain has defended the technology giant after politicians attacked foreign companies for trying to cheat the system with their tax practices.

Foreign firms face tax crackdown in U.K. and Europe Google_2411628b

Foreign firms face tax crackdown in U.K. and Europe Google_2411628b

Matt Brittin said he did not mind the 'belligerent' grilling he had received from MPs on the Public Accounts Committee two weeks ago Photo: Geoff Pugh

By Louise Armitstead, Chief Business Correspondent

7:46PM GMT 27 Nov 2012

271 Comments

Matt Brittin said it was down to politicians to legislate if they wanted to force change as he fought back against suggestions that multinationals are "immoral".

The Google boss said that while he did not mind the "belligerent" grilling he had received from MPs on the Public Accounts Committee two weeks ago, the public debate was creating the view that all "businesses are trying to do negative things and get away with them."

"It's the wrong bias to think everyone is out to cheat," he told Channel 4 News. "I find it frustrating when we're criticised because I'm not immoral and neither is Google. If Google were immoral, I would not be working here….I'm proud of the way we operate."

Mr Brittin, who rowed for Britain in the 1988 Seoul Olympics, was lambasted by the PAC for low tax contributions along with the bosses of Starbucks and Amazon. Google paid £6m corporation tax on £2.5bn of UK revenues in 2011.

At the hearing Margaret Hodge, chairman of the PAC, said: "We are not accusing you of being illegal. We are accusing you of being immoral."

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But Mr Brittin said MPs were blaming companies for a system that they had designed. "Google plays by the rules set by politicians," he said. "The only people who really have choices are politicians who set the tax rates."

Insisting that Google pays its tax in America, Mr Brittin said: "I would love it if Google had been invented in Cambridge...if Google had been created there and was a British business we'd be having a very different conversation now. We would be paying tax based on where our product was created – in that case, we'd be paying the majority of our tax here and operating in the US in a very different way."

However, last night a top executive at supermarket chain Morrisons became the latest retail heavyweight in the UK to call on the Government to force foreign firms to pay more tax. Richard Pennycook, finance director of Morrison's, told Sky's Jeff Randall Live: "We want a level playing field. What applies to one company should apply to another. There are big differentials in what companies are paying." He added: "The Chancellor must look into this and regulate. Taxes on activity here in the UK should stay here. Transparency is very important."

Morrisons said it paid £281m in UK corporation tax, more than a quarter of its profits. By comparison Aldi, the German-owned supermarket rival, paid £12.7m of UK corporation tax, or 17.7pc of its £70.5m profits. In a statement Aldi said it had "always respected and complied with the tax laws."

It also emerged, in new figures supplied by Amazon to the PAC, that the online retailer's total UK sales topped £2.9bn last year, while declaring Amazon.co.uk revenues of only £207m. For the past three years, Amazon.co.uk Ltd paid £2.3m in corporation tax on UK sales of £7.1bn.

Meanwhile, French ministers signalled they are ready to change the laws to force online companies to pay full levies on earnings made in France. Fleur Pellerin, the French technology minister, told reporters: "There's a serious issue around fiscal harmonisation in Europe. There's a will to change this in Europe but the timeline is too slow. Tax rules set at a time when commerce was physical are not appropriate any more."