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Google, Starbucks and Amazon “immoral”, say MPs

The Public Accounts Commmittee seeks answers from Google, Starbucks and Amazon over their tax affairs

13 Nov 2012 Accountancy Age

By Calum Fuller

Margaret Hodge Institute for Government flickr photostream

GOOGLE, STARBUCKS AND AMAZON are using "immoral" tax arrangements, MPs in the Public Accounts Committee said.

Representatives from the US companies were called before the committee to explain why they had paid so little tax in the UK.

Amazon director of public policy Andrew Cecil was admonished by committee members for his inability to provide a range of information, particularly on profit made by each of the company's sites and any breakdown of sales on jurisdiction-by-jurisdiction basis.

He insisted the company operates on a "pan-European basis", but later conceded he was unaware of the company's ownership structure.

That admission drew a fiery response from Margaret Hodge (pictured), chair of the committee, who told Cecil he was "not serious".

"You've come to us with nothing. I don't know what you take use for, but you can't come here and pretend ignorance," she said.

A more senior Amazon executive would be summoned in due course, she added, to answer the committee's questions.

Starbucks' global CFO Troy Alstead told the committee that in the 15 years the coffee house had been operating in the UK, it had only been profitable in 2006. In that year, it paid £8.6m in corporation tax.

Those losses were caused by property costs from concentrating many of its coffee shops in London and expanding too rapidly in the UK market, he said.

However, the committee was unconvinced "any corporate entity would sustain losses for 15 years".

"If you [Starbucks] have only made one year of profit in 15 years, why are you still here? It doesn't ring true," said Hodge.

Alstead said he felt "terrible" that the British public purse was losing out, but "assured" the committee that Starbucks "is not making money in the UK".

"We are never aggressive in avoiding taxes by any means", he said.

The existence of a discounted tax rate with the Netherlands was also revealed by Alstead, while questions were raised about the company's coffee-buying operation in Switzerland.

Google vice-president for northern Europe Matt Brittin admitted the internet giant had employed a withholding tax avoidance scheme in the Netherlands, but said it was no longer in place.

The company's European base is in Dublin, which is administered from Bermuda, he said, while its revenue in the UK was £396m in 2011, with £31m profit and £6m corporation tax paid.

While Brittin was praised for the "helpful" nature of his responses, the committee said it was "annoyed UK profits end up in Bermuda".

"We don't think you pay a tax that is just," it added.

Britiin responded by saying that "we [Google] play by the rules and operate our business efficiently".

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