Tag Archives: Corporation Tax

Britain, Business, Economic, Finance, Government, Legal, Politics, Society, Taxation

Amazon’s tax advantage is economically unfair. Time to put a halt to it…

 

TAX LOOPHOLES

The age of the internet has brought colossal benefits to many large, multinational companies. No more so than for Amazon, a distribution giant. The company has earned very lucrative revenue streams, but has managed to deftly reduce its corporation tax bill through skilful use of tax loopholes. Last year, Amazon paid just £4.2 million in UK corporation tax, despite generating UK sales of £4.3 billion. The firm has been heavily criticised because it has now emerged that it avoided paying billions of pounds in tax last year by funnelling revenue of £11 billion through an overseas company based in Luxembourg. Amazon is also reported to have received a financial inducement and rebate amounting to £4m from the authorities in Luxembourg as part of the controversial arrangements.

This is all the more startling considering Amazon has received more than £10m in financial assistance from the Scottish Government, with the company opening a logistical distribution hub in Dunfermline, alongside its customer call centre in Edinburgh.

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Striking the right balance between competitive rates of Corporation Tax to attract foreign direct investment such as this while ensuring companies pay their rightful share is a difficult and complex area for politicians of all parties. Whilst Amazon’s avoidance causes public anger, governments have to take into account the investment the company has made in a country and the employment which that investment has created. Amazon may well argue that it would not have invested if it had been discouraged from exploiting this position.

A low rate of Corporation Tax which the UK offers in comparison to other countries is generally attractive for foreign firms wishing to make direct investment. But such schemes should also encourage companies like Amazon to pay and reduce the incentive for elaborate avoidance schemes of this sort. The loopholes provide too much of an economic and financial advantage for many large multinational firms. These require to be reined in through tighter political scrutiny and more exacting and better enacting of legislation.

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Business, Government, Scotland

Accenture lands IT contract with Police Scotland…

POLICE SCOTLAND IT PROJECT

A FIRM at the centre of one of the world’s biggest public sector computing disasters has been handed a Scottish police IT contract.

Accenture will be in charge of developing a crime-fighting computer system – currently costing £60 million – for Police Scotland.

The project was already under fire as the projected bill has risen about £15 million in recent weeks.

Accenture was involved in the disaster-prone development of a £12.7 billion computer system for the NHS in England and Wales.

In 2006, it pulled out of the contract – then one of the world’s biggest IT projects – at a time when it was running about two years behind schedule. The entire project was eventually abandoned in 2011.

The IT and technology giant, with its Headquarters in the Republic of Ireland but with offices around the world, has also faced questions over alleged moves to minimise payment of UK corporation tax, although there is no suggestion of wrong-doing.

Graeme Pearson, a Scottish Labour justice spokesman, said that changing the entire IT system for Police Scotland is going to be massive, and says it’s right that the very best advice is available. But Mr Pearson also pointed out that before this contract had even been announced, costs have continued to spiral. He says that the contract has been awarded to a company with a chequered track record of delivering major change programmes in our public sector.

Police Scotland and the Scottish Police Authority (SPA), the civilian body which oversees it, selected Accenture to develop and maintain the new IT system – called i6 – for the single force, which is still using the eight systems inherited from the old regional forces.

The contract will run over ten years but with a possible two-year extension. It is worth £39 million out of the projected £60 million total budget.

Police Scotland says it can now start its journey with Accenture that will allow it to have (national) policing processes that are supported by a modern IT solution.

Accenture’s industrial experience in providing support to global policing, along with the company’s strong local expertise in Scotland, is believed to have been central to its selection by Police Scotland.

Accenture generated global net revenues of £21 billion in 2011-12. But in May the firm faced claims it was one of a group of internet and technology companies allegedly minimising UK corporation tax payments by sending some revenues to Ireland.

A spokesman for the firm, said:

… Accenture pays UK tax on all of its UK business. It reports revenue under those contracts and files accounts in the UK annually.

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Britain, G8, Google, Government, Politics

Google’s tax ploys criticised by MPs…

GOOGLE has been accused of ‘relying on deeply unconvincing arguments’ to avoid paying millions of pounds in British taxes.

The online search engine was described as ‘brazen’ for denying ‘clear evidence’ that it made millions from selling advertising in the UK, a powerful body of MPs found.

Last year, Google paid just £7.3 million in corporation tax on sales of £3 billion. Tax analysts say the figure should have been at least £200 million higher.

The shortfall deprives Her Majesty’s Revenue and Customs (HMRC) of money to fund public services, leaving ordinary taxpayers in Britain to make up the difference.

Matt Brittin, former Managing Director of Google in the UK and current Vice President of the company, last year told MPs all of its sales were made from its European HQ in Dublin, and its British subsidiary was merely a ‘service company’. This allows it to pay tax in Ireland, which has a corporation tax rate of just 12.5 per cent compared with Britain’s 23 per cent.

But Google was hauled back in front of MPs last month after fresh evidence emerged UK staff were involved in selling.

In its report published this week, the Public Accounts Committee found Google’s arrangements were ‘manifestly artificial’ and ‘have no purpose other than tax to enable it to avoid UK corporation tax’.

Margaret Hodge MP, who chairs the committee, said:

… Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful… This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK-based staff are engaged in selling.

She previously said that, contrary to its corporate motto, Google ‘does do evil’ by avoiding taxes in the UK.

Her comments come ahead of the G8 meeting next week hosted by Britain, where global leaders will come under pressure to crack down on tax havens and tax dodging by multinational corporations.

Google openly admits using Bermuda to lower its global tax bill, and last year funnelled more than £6 billion into the offshore haven.

There were ‘clear discrepancies with the claims made to us by Mr Brittin in November 2012’, the report said. It found 70 per cent of Google’s sales involve UK staff as well as Irish workers, and its UK workers are largely paid by commission and have monthly sales targets.

Evidence also emerged of Google invoices sent out bearing British addresses, and Mr Brittin admitted ‘a lot of the aspects of selling’ did take place in the UK.

Mrs Hodge also criticised HMRC, saying:

… It is extraordinary that the department did not challenge Google over the complete mismatch between the company’s supposed structure and the substance of its activities. We could not understand how a few journalists, whistleblowers and MPs have uncovered what the department could not.

Google has said that it complies with all the tax rules in the UK, and it is politicians who make those rules. It added:

… It’s clear from this report the Public Accounts Committee wants to see international companies paying more tax where their customers are located, but that’s not how the rules operate today. We welcome the call to make the current system simpler and more transparent.

David Cameron, the British Prime Minister, said he would use the G8 summit to try to broker a deal on tax avoidance. Mr Cameron said that in a globalised world, no one country can on their own effectively stamp out either tax evasion or aggressive tax avoidance and this is exactly the sort of issue the leaders of the eight major economies should be addressing.

Conservative MP Stewart Jackson, who sits on the committee, said:

… The Government must look again at multilateral and bilateral tax protocols via the chairmanship of the G8, strengthen capacity at HMRC and look at simplified tax legislation as a matter of urgency.

Mr Jackson’s colleague, Steve Barclay MP, said there’s clear evidence Google is conducting sales operations and making astronomical profits in the UK – to suggest otherwise is plain fantasy.

A statement from the Treasury has said that the Government remains committed to creating the most competitive corporate tax system in the G20, but says this goes hand in hand with our call for strong international standards to make sure global companies, like everyone else, pay the taxes they owe.

HMRC says that, since 2010, it has collected over £23 billion in extra tax through challenging large businesses’ tax arrangements. It insists it will relentlessly pursue businesses that don’t play by the rules.

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