As expected Amazon, Starbucks and Google were quizzed by MPs today at the Commons Select Committee meeting. Max Brittin of Google openly admitted that being based in Ireland was because of the low Irish 12.5% Corporation tax compared to the UK rate of 24%.
Starbucks have a particularly complex setup with 4.7% (previously 6%) in royalties being skimmed off to the Netherlands and a 20% markup on coffee paid to their Swiss operation. It can easily be argued that if Starbucks kept that 26% revenue in the UK they’d be paying a reasonable chunk of corporation tax.
Amazon got a bigger roasting than any Starbucks coffee bean has ever been subjected to. Amazon, like eBay, have never revealed revenues and profits by country and so came unprepared without the figures to give to MPs. Amazon’s Andrew Cecil repeated the mantra that he would have to come back the MPs and see if the figures could be disclosed. I do feel some sympathy for Amazon here, eBay also don’t break out figures by country and whilst MPs can demand the information it is commercially sensitive.
Unlike eBay however, who provide a service (and let’s not forget the EU has been banging on about how we should be able to source services from any EU country just as easily as from the UK), Amazon are also a retailer. There’s a good argument that if a product is shipped from a UK warehouse to a UK consumer that the profits should be held within the UK.
It’s also worth remembering that whilst they may pay little in corporation tax, these same companies also pay £100s of millions in payroll taxes and business rates. However, it’s also notable that Amazon just received a $252 million bill from the French tax collectors, which Amazon have said they intend to dispute.
What’s unquestionable is that all three companies are paying all the taxes due, it’s just that much of the tax is paid outside the UK. Several companies have been named and shamed in the press for paying little corporation tax in the UK including eBay and Facebook and it would be wrong to turn today’s Public Accounts Committee meeting into a witch hunt purely against the high profile companies named in the press. There are numerous other businesses who use the same tactics.
If the government wants companies to pay corporation tax in the UK for business functions performed for UK businesses and consumers there needs to be an even handed change in the law which applies to all international companies operating in the UK.
Whether this is even possible under EU law isn’t a question we at Tamebay are qualified to answer. If the UK gains more taxes then other EU countries like Ireland and Luxembourg will have correspondingly lose tax income. Equally, are there UK companies paying UK corporation tax which could be lost if other countries start insisting they also pay tax in the territories they operate in?
Whichever way you look at it, it appears morally wrong that large companies pay little tax in the UK, whilst British small businesses using services from the likes of Amazon, Google and eBay pay much higher percentages to the Exchequer. It will be interesting to see what the Public Accounts Committee conclusions are and how tax law changes in the coming years. What seems clear is that there is a public appetite to clamp down on big corporations avoiding tax through such practices.