Global giants must be 'named and shamed' over tax avoidance

MPs calls for end to 'sweetheart deals' and insist multinationals should be prosecuted for not paying enough tax

"Immoral" multinational companies that avoid paying their fair share of tax in Britain should be named and shamed by the Government and face prosecution rather than being offered sweetheart deals, an influential committee of MPs will recommend today.

The Chancellor, George Osborne, will announce 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 to be released today, the cross-party Public Accounts Committee (PAC) calls for the Government to take an even tougher line. It says legislative change is needed to ensure that multinationals report their tax practices transparently, and with prosecutions rather than deals for companies found to be avoiding tax. 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.

"HMRC 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," she said.

"The drive to make these companies live up to their obligations will have to be conducted on a number of fronts. These include possible legislative change within the UK and efforts to increase international co-operation."

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."

Numbers up: What they claimed, and what the committee found

Amazon reported turnover of £207m in 2011 for its UK operation, on which it paid tax of £1.8m. However, Amazon provided the PAC with information showing that for 2011, £3.35bn of its sales were from the UK, 25 per cent of all sales outside the United States.

Starbucks told the PAC it had made a loss for 14 of the 15 years it has been operating in the UK. But it also briefed shareholders that its UK business was successful and it was making 15 per cent of its global profits in the UK. Its estimated pre-tax profit for the year was £59.6m, on which it paid £0 in tax

In the UK, Google recorded revenues of £396m in 2011 and paid corporation tax of only £6m. However it is estimated that Google actually had £2.75bn of revenue from its operations in the UK with an estimated pre-tax profit of £836m.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?