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U.K. Criticizes U.S. Multinationals’ Tax Avoidance

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By Michael Cohn
December 4, 2012

A report from a British Parliamentary committee takes aim at the tax strategies of the U.S. multinational giants Amazon, Google and Starbucks.

The report, from the United Kingdom’s Public Accounts Committee, noted that corporation tax revenues have fallen at a time when budget deficits mean that securing proper income from taxes is more vital than ever.

"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 committee chair Margaret Hodge in a statement. “This is outrageous and an insult to British businesses and individuals who pay their fair share.”

Margaret Hodge

Executives from Amazon, Google and Starbucks were grilled at a hearing last month to defend their tax practices. “We’re not accusing you of being illegal, we’re accusing you of being immoral,” Hodge told a Google executive at the hearing, according to Time.

Hodge noted in presenting the report Monday that there is little credible information about what is going on. “The evidence we took from large corporations was unconvincing and, in some cases, evasive.” British tax authorities also lacked clarity when trying to explain their approach to enforcing the corporate tax regime, she added.

“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.,” she added. “HMRC [Her Majesty’s Revenue and Customs] should be challenging this but its response so far to these big businesses and their aggressive tax planning has lacked determination and looks way too lenient. Policing the tax system must be at the heart of what HMRC does. It must be more aggressive and assertive in confronting corporate tax avoidance. This is essential for the credibility of both the department and the tax system.”

She threatened possible legislative change within the U.K. along with efforts to increase international cooperation. “The multinationals should be required to report their tax practices transparently,” said Hodge. “Prosecutions should be mounted where necessary and offenders should be publically named and shamed. We consider that paying an appropriate amount of tax in the country in which profits are made is not only a matter of basic economics. It is also a matter of morality. The U.K. should be taking the lead in making this point.”

3 Comments

It's interesting that the lawmakers dealing with this issue are trying to guilt these companies into paying more taxes by saying that avoiding taxes is immoral. There is nothing immoral about tax avoidance by using the written tax law to pay less taxes. If a company is doing illegal things then there's a different story. Change the tax law and remove specific loopholes if you want more taxes and less tax avoidance.

Posted by: jsully88 | December 4, 2012 1:00 PM

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Maybe Amazon, Google and Starbucks should just pull out of the UK. They can make money in the other countries. Why should they have to pay exhorbitant taxes when they clearly employ so many in that country who in turn pay taxes. I guess that "immoral benefit" to the UK goes unnoticed.

Posted by: rharper1916 | December 4, 2012 8:30 AM

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The British report is spot on. If you earn revenue in a given location, pay the taxes due on that revenue for that jurisdiction!

Posted by: AusTex_2013 | December 4, 2012 8:22 AM

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