Three American companies – including two Internet giants – have been accused of deliberately hiding profits from their British operations in an attempt to avoid paying taxes by a committee made up of UK Ministers of Parliament, bringing into relief long-term discussions over closing possible tax loopholes that may have made the United Kingdom and Ireland such attractive locations for companies to decamp to in the first place.
Appearing before the committee, Matt Brittin, Google’s head of Northern Europe, said that the company operates its international operations from Ireland because of the low corporate tax rate available there (12.5 percent). The company’s filings show that it had £2.5 billion worth of sales in the United Kingdom last year, but despite having a profit margin of 33 percent, managed to pay only £3.4 million in taxes. That’s because it diverts non-US sales through the Irish headquarters, which asks for just 3.2 percent in taxes on non-US income (The company also funnels a portion of its profits through Bermuda, lowering taxable income further).
“Like any company, you play by the rules [and] manage costs efficiently to offer fair value to shareholders,” Brittin told the committee. That wasn’t good enough for the chair of the committee, Margaret Hodge, who responded by telling him that she was “not accusing you of being illegal, we are accusing you of being immoral.”
Amazon’s director of public policy, Andrew Cecil, underwent similarly harsh treatment when he appeared in front of the committe, being accused of being “totally evasive” when he said that he was unable to explain who owned the company, as well as unable to detail income generated by the British arm of the business. In response, Hodge said that he was clearly “not a serious person” to appear before the committee, pointing out that British customers who order books from the site, and receive their orders shipped from a British depot, and yet Amazon seems to be paying taxes on those sales in Luxembourg (Amazon.co.uk paid £1.8 million in taxes last year on £200 million turnover according to the company’s own figures). Hodge has demanded that another Amazon executive appear before the committee in two weeks to answer the questions that Cecil was unable to, although he did offer up that the company was also under investigation for tax avoidance in France, as well… Perhaps something that he might have wanted to keep under his hat, all things considered.
Discussing the need for the committee, Hodge said that “”People want to know why companies which benefit from an infrastructure paid for by them and are paying people low wages who receive taxpayer-funded tax credits from the exchequer are not paying their fair share.” No recommendations were passed down as a result of today’s hearings, with both Amazon and Google – and the third US company, Starbucks – being requested to submit further information for future study.