A committee of lawmakers has called on the British government to crack down on multinational companies that make substantial sales in Britain, but pay little tax there, echoing demands from leaders across Europe for an implementation of measures to tackle corporate tax avoidance.
The British Public Accounts Committee (PAC) yesterday said 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,” PAC chairperson Margaret Hodge said.
The committee, which is charged with monitoring government financial affairs, also said the UK’s taxman, Her Majesty’s Revenue & Customs (HMRC), was 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 Corp, Google Inc and Amazon.com Inc over why they paid little tax in the UK while taking in billions of British pounds in revenue.
The committee said it found the evidence it received was “unconvincing, and in some cases evasive.”
Starbucks said it has always complied with UK tax law, but revealed on Sunday that, in response to the public outcry over its tax arrangements, it was looking into changing them.
Amazon said that it complied with the tax rules, but declined to comment on the committee’s findings. Google declined to comment.
The recent focus on tax avoidance in the UK follows a media 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 British taxman.
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 many countries’ political agenda.
Tax campaigners and groups opposed to austerity measures have pushed the British government to lean more heavily on big businesses to close the budget gap.
Even some big British businesses are taking exception to the way some of their overseas rivals are 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.
The French government last month said that it was discussing new measures to tax internet companies such as Amazon and Google, which minimizes its tax bill by booking sales through an Irish subsidiary.
British Chancellor of the Exchequer George Osborne last month announced that he had teamed up with his German counterpart to lead a push in the G20 economic powers to make multinational companies pay their “fair share” of taxes.