David Cameron has ruled out “naming and shaming” large multinational companies who fail to pay their “fair share” of tax in Britain.
Downing Street said the Prime Minister was opposed to any move that would undermine taxpayer confidentiality despite criticism by a powerful committee of MPs that the Government “lacked determination” to tackle the problem.
Margaret Hodge, chairman of the powerful cross-party Public Accounts Committee said tax officials needed to be more aggressive in tackling legal avoidance by firms such as Amazon, Google and Starbucks who pay next to no tax in the UK.
She was speaking as a report released by her committee said offenders should be named and shamed by the Government and face prosecution rather than being offered sweetheart deals.
However this was ruled out by the Prime Minister’s official spokesman who said: “An important part of our tax system is taxpayer confidentiality. We would not want to do anything to undermine that.”
The Chancellor, George Osborne, today announced an extra £150m of funding for Her Majesty's Revenue and Customs (HMRC) this week to help crack down on avoidance by global companies with British operations, which the Treasury predicts will raise up to £2bn within two years.
The coffee chain Starbucks, one of the multinational companies accused of tax avoidance, will also announce a deal with the Treasury to pay more on its UK earnings.
But in a hard-hitting report released today, the cross-party Public Accounts Committee (PAC) called for the Government to take an even tougher line. It said legislative change was needed to ensure that multinationals report their tax practices transparently, and with prosecutions rather than deals for any companies which were found to be avoiding tax in an illegal way. Offenders, it says, should be publicly named and shamed.
The PAC said it had been unhappy with the “unconvincing, and in some cases evasive” evidence it had received from representatives of Starbucks, Google and Amazon who were called in front of the committee last month to defend their tax affairs.
It said there was currently "a complete lack of transparency" about why multinationals paid so little UK corporation tax. Their operations were structured in ways that were impenetrable to the public, while HMRC disclosed very little about its approach to collecting tax from them.
The PAC report concludes: "HMRC needs a change in mindset in the way it approaches collecting tax from multinationals.
"At the moment there is a pervasive acceptance of the status quo by the top officials in HMRC and we have seen little evidence of a desire to be more assertive. We expect HMRC to prosecute multinational companies who do not pay the tax due in the UK."
Margaret Hodge, the committee's chair, said the inescapable conclusion from the inquiry was that multinationals were using structures and exploiting current tax legislation to move profits offshore that were clearly generated from economic activity in the UK.
“When we looked at these three big global companies – and they are were just examples, others do the same – I think that HMRC, the tax authorities, aren’t aggressive enough or assertive enough in trying to make sure that the claims these companies made are valid.”
“The little bookshop, the corner bookshop, or the small coffee shop in your high street, they don’t have the advantage of an army of very, very well-paid and qualified accountants and lawyers to defend them – they pay their taxes. Starbucks, Google, and Amazon don’t pay at the same rate, and that’s an unfair competitive advantage to the global companies.”
In an attempt to show that the Government is taking the concerns seriously, Mr Osborne will shortly announce extra investment to crack down on tax avoidance by global companies.
The Chancellor plans to bolster the HMRC team that deals with multinationals as well as working with other governments in an attempt to arrive at an international deal that prevents companies moving their profits into low-tax offshore domains.
He told the BBC: "I think you can do two things. One is you can enforce the taxes we have got and I am going to be announcing tomorrow extra investment in the part of the Inland Revenue that tackles tax avoidance by multinational companies.
"Second, you make sure internationally we have the right rules, and it is actually Britain who has been working with Germany and France to get those rules on the international table. It will be a big priority for the G7, G8, which we host next year.
Meanwhile in a sign that public pressure maybe having some effect on the multinationals, Starbucks confirmed that it was in talks with the Government about paying more in UK taxes.
"We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," a spokeswoman said.
"As part of this we are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with the Treasury. We will release more details later in the week."