Osborne targets big business as Britain is robbed of 32billion taxChancellor George Osborne will try to bring forward a 10billion clampdown on tax avoidance by multinationals and the richThe Commons Public Accounts Committee has accused HM Revenue and Customs of being 'way too lenient' on big companies
00:13 GMT, 3 December 2012
Front foot: Chancellor George Osborne will bring forward a 10billion clampdown on tax avoidance by multinationals and the rich
Ministers must ‘get a grip’ on the immoral behaviour of corporate giants contributing to Britain’s astonishing 32billion tax shortfall, MPs warn today.
In a devastating report, they brand the use of legal ruses by multinational businesses including Google, Starbucks and Amazon ‘an insult to British businesses and individuals who pay their fair share’.
George Osborne will try to get on the front foot this morning by bringing forward a 10billion clampdown on tax avoidance by multinationals and the rich.
The Chancellor said: ‘I completely understand people’s anger when they see companies – I’m not going to name specific companies – but when they see companies apparently not paying their fair share of taxes. We’ve got to make sure they pay their fair share of taxes.’
But today’s report by the Commons Public Accounts Committee accuses HM Revenue and Customs of being ‘way too lenient’.
The study follows stormy evidence sessions with executives from Google, Amazon and Starbucks, whose evidence MPs say was ‘unconvincing and evasive’.
MPs describe the tactics used by multi-nationals to avoid tax as ‘outrageous’, but ‘widespread’ as a result of lax enforcement.
They say the issue accounts for a quarter of the 32billion-a-year tax gap – the difference between the tax HMRC is due and the amount it receives, adding that while the practice of pushing profits overseas into tax havens such as Bermuda and the Cayman Islands is legal, it is also ‘immoral’.
The committee’s Labour chairman Margaret Hodge said: ‘The inescapable conclusion is that multinationals are using structures and exploiting current tax legislation to move offshore profits that are clearly generated from economic activity in the UK.’
She added: ‘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.’
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Ministers are alarmed that the scale of corporate tax avoidance is fuelling public resentment at a time when ordinary workers are being asked to pay more towards bringing down the huge budget deficit.
The report says international firms have ‘an unfair competitive advantage over British businesses which have no choice but to pay their corporation tax’.
Mr Osborne will announce today that HMRC will be given an extra 154million over the next two years to help crack down on tax avoidance. The Treasury forecasts this will claw back 10billion over the next five years. HMRC’s ‘affluence unit’ will also recruit 100 extra investigators to clamp down on tax-dodging by the rich.
Ministers are privately irritated by the tone of today’s report, which they say ignores recent improvements by HMRC, which has already been given an extra 900million to tackle tax-dodging.
Dodgers: For years, governments have been promising a crackdown on corporate tax avoidance by giants like Google and Starbucks
The Commons investigation was launched after public anger was fuelled by revelations that Starbucks paid no UK corporation tax in the last three years. The coffee giant yesterday pledged to pay more tax, after a furious reaction from the public to the revelations, including boycotts of its stores.
In 2011, Google avoided more than 200million in tax, only contributing 6million to HMRC despite revenues of 2.6billion.
The online search engine subsequently admitted to funnelling its profits over to Bermuda – a renowned tax haven.
Amazon was last week forced to reveal to the committee that its UK operations recorded a pre-tax profit of 74million last year but paid 1.8million to HMRC – an effective rate of just 2.6 per cent.
The online retailer, which is registered in Luxembourg and has a deal with the country’s government to lower its tax bill, was also forced to admit it made 3.35billion in sales in the same year.
Tax accountant Richard Murphy said last night: ‘HMRC badly needs to be reformed. It is far too friendly with big business because it is virtually being run by big business.’