British Lawmakers Accuse Multinationals of ‘Immorally’ Avoiding Taxes

George Osborne, the chancellor of the Exchequer, said he had earmarked an additional £77 million, or $124 million, for a campaign against “offshore evasion and avoidance by wealthy individuals and multinationals.” The push, the Treasury said in a statement, was expected to yield £2 billion in additional annual revenue.

The drive comes amid growing criticism in Britain and elsewhere in Europe of the fiscal policies of several American companies that pay little tax on the billions of pounds and euros in sales that they generate in the region.

“Global companies with huge operations in the U.K., generating significant amounts of income, are getting away with paying little or no corporation tax here,” said Margaret Hodge, chairwoman of the Public Accounts Committee of Parliament, in a report published Monday. “This is outrageous and an insult to British businesses and individuals who pay their fair share.”

The report focused on the tax practices of Starbucks, Amazon and Google, criticizing their policy of using lower-tax jurisdictions within Europe, like Ireland, Luxembourg and Switzerland, to record much of the revenue they generate in higher-tax countries like Britain, France and Germany. Companies like Google then transfer money they earn in Europe to Bermuda or other locations, thereby deferring or avoiding U.S. taxes as well.

At parliamentary hearings last month, executives of Google, Amazon and Starbucks maintained that their tax policies were perfectly legal, because European Union law lets companies based in one member state operate across the 27-country bloc.

But tax investigators in several countries, including France, are looking into whether the practice, which is also employed by European companies, is legal. Amazon recently disclosed that it had received a bill from the French fiscal authorities for $252 million in back taxes, adding that it was contesting the claim.

Starbucks said Monday that it was reviewing its British tax practices, after the company disclosed recently that it had paid no corporate tax in Britain last year, despite generating £398 million in sales.

“To maintain and further build public trust we need to do more,” Starbucks said in a statement. “The company has been in discussions with H.M.R.C. for some time” — a reference to Her Majesty’s Revenue Customs, the British tax collection agency — “and is also in talks with the Treasury.”

Google declined to comment Monday but has previously insisted that its tax practices comply with British law.

Amazon did not respond to repeated requests for comment.

The British parliamentary report stopped short of accusing the companies of tax fraud but said their explanations had been “unconvincing and, in some cases, evasive.”

“The inescapable conclusion is that multinationals are using structures and exploiting current tax legislation to move offshore profits that are clearly generated from economic activity in the U.K.,” Ms. Hodge said.

The committee also criticized Her Majesty’s Revenue Customs, saying it had been “too lenient.”

The government said it would hire experts to investigate “transfer pricing arrangements,” which multinational companies use to reduce their tax liability in higher-tax jurisdictions.

“The Government is clear that while most taxpayers are doing their bit to help us balance the books, it is unacceptable for a minority to avoid paying their fair share, sometimes by breaking the law,” Mr. Osborne said in a statement.

Article source: http://www.nytimes.com/2012/12/04/business/global/british-lawmakers-accuse-mulitnationals-of-immorally-avoiding-taxes.html?partner=rss&emc=rss