Taxman admits Government powerless to force multinationals to declare profits

HMRC chief denies turning blind eye to global giants avoiding massive UK tax bills

The Government is powerless to stop large multi-national companies like Starbucks and Google from paying almost no tax on their profits in this country, Britain’s most senior tax official admitted today.

Lin Homer, Permanent Secretary of Her Majesty’s Revenue and Customs, told MPs the Government was currently unable to prevent big international corporations from declaring their profits in foreign countries with tiny tax rates - even if they made those profits in this country.

But within minutes of making the admission the Chancellor George Osborne announced that he was working with Germany in a concerted international attempt to address multinational tax evasion.

He said both counties would raise the issue at the G20 meeting in Mexico this weekend with the aim of introducing new OECD rules to outlaw the practice.

Next week senior executives from the coffee chain Starbucks are due to face MPs on the Public Administration Committee to explain why they have only paid £8.5 million in Corporation Tax despite in the last decade despite racking up £3bn in sales in the UK.

Officials from Apple and Google may also be called to give evidence to the Committee.  Last year Google paid £6m in tax on a turnover of £395m while Apple is thought to be paying £14.4 million in tax on more than £1 billion of sales.  It has been claimed that a more realistic tax bill would be closer to £570m.

The companies avoid the tax by setting up there international corporate headquarters in havens which attract next to no corporation tax. They have also been accused of adding artificially high costs – such as royalty payments – to the countries where they do business to cut down of their tax liabilities.

Giving evidence to the PAC Ms Homer said such practices were outside the scope of the HMRC’s powers and would require a coordinated international effort to tackle.

“All HMRC can do is to apply the laws and what I am acknowledging is that in an international setting multinational businesses can choose to some extent where some parts of their business are based and they can choose where some of their profits are based,” she said.

“I think that is very hard for individuals to understand and it is one of the reasons the Chancellor does want to make sure that the OECD stays ahead and does not allow an inappropriate amount of activity that would undermine tax systems.

“Many people, including quite a lot of finance ministers, would think that a situation where some countries offer a very, very low tax base is a challenge to all of us. That is different from saying that I have reservations about our expertise in enforcing the rules as they currently are.”

But Richard Bacon, deputy chair of the PAC, said most people would be outraged that a company with such a large presence in the UK as Starbucks could legally avoid paying the same rate of Corporation Tax as a smaller company that could not move its tax offshore.

“It smells and it doesn’t smell of coffee,” he said. “It smells bad.”

The Labour MP Austin Mitchell claimed it was part of a deliberate strategy to concentrate HMRC’s tax raising efforts on smaller companies and individuals who were less able to stand up to them

“You go easy on the big boys and go harder on the companies that can’t leave and have to pay their tax here,” he alleged.

“You are handling the big corps more gently, more kindly and generously than you are small and medium size British enterprises that can’t move their affair to a tax havens.”

Ms Homer denied this.

Announcing the move to try and get international Governments to work together to tackle tax avoidance Mr Osborne said he wanted Britain to have a competitive tax rates – but that those taxes needed to be paid

“We want competitive taxes that say Britain is open for business and that attract global companies to invest in and bring jobs to our country, but we also want global companies to pay those taxes,” he said.

“The best way to achieve that is through international action that ensures strong standards, without pricing ourselves out of the global market.“

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

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

Recruitment Genius: Project Implementation Executive

£18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own