Multinational Companies Face Accusations of Avoiding British Corporate Tax

Pressure is mounting on multinationals, notably Google and Starbucks, to justify the amount of tax they are paying in Britain amid accusations that the levels are far too low.

According to figures cited by Conservative MP Charlie Elphicke, Google paid only £3.4 million (US$5.4 million) in British corporation tax last year on revenues totaling about £2.5 billion, while Starbucks did not pay a penny on sales worth £400 million.

Starbucks has confirmed not paying any corporation taxes in Britain for the past three years owing to fees paid to other areas of its business, such as royalty payments for the use of its brand.

This resulted in the company posting a series of losses and not having to pay any corporation tax.

Corporate Tax Issue Gains Momentum

The thorny issue gathered momentum last week at a gathering in Mexico of finance ministers and central bankers from the Group of 20 developed and emerging nations.

British Finance Minister George Osborne and his German counterpart Wolfgang Schaeuble called in a joint statement for "concerted international cooperation to strengthen international standards for corporate tax regimes."

However, Chancellor of the Exchequer Osborne also insisted that those strong standards must not deter large international companies from making vital investments.

Google has come under closer scrutiny in several European nations where cash-strapped governments are increasingly wary of being shortchanged on tax revenue.

According to a newspaper report in France, French tax authorities have made a billion-euro (US$1.3 billion) claim against Google over financial transfers between an Google holding company in Ireland and its French unit.

Google Claims Compliance with Tax Laws

Google France told AFP this week that it had received no such tax claim, and that it complies with tax laws in all the countries in which it operates.

In Britain meanwhile, Business Minister Vince Cable used an interview with The Guardian newspaper on Tuesday to attack multinationals who exploit tax loopholes to reduce their bills.

"At times of hardship, when tens of thousands of British companies are paying their basic tax, to discover that leading multinationals are getting away with it is not acceptable," Cable said.

Osborne, whose Conservatives head a coalition with Cable's Liberal Democrats, is seeking to slash Britain's huge deficit by cutting tens of thousands of civil service jobs and axing certain state benefits.

Corporate Tax Rate Reduced

Osborne earlier this year cut corporation tax -- which is levied on company profits -- to 24% from 26% in a bid to boost jobs and investment in Britain. The government plans to slash it to 22% by 2014.

HMRC, the body responsible for collecting Britain's taxes, has meanwhile defended itself against strong accusations that it is too soft on multinationals.

"I can refute any suggestion that we have been told to go easy on big business," Lin Homer, chief executive of HMRC, told the Public Accounts Committee -- a panel of British lawmakers -- this week.

'A Mood of Anger'

But Margaret Hodge, a deputy for the opposition Labour party, argued differently, telling Homer: "There's a mood of anger out there and huge frustration that ordinary people and small businesses feel that they are hassled by you ... whereas if you are a big corporation you might be invited in for a cup of coffee."

The Public Accounts Committee, which comprises also lawmakers from the Conservatives and Liberal Democrats, were next week due to grill representatives from Amazon, Google and Starbucks over their corporation tax levels.

Ahead of next Monday's session, Google strongly defended its actions in Britain.

"We make a substantial contribution to the UK economy through local, payroll and corporate taxes," a company spokesperson told AFP.

"We also employ over 2,000 people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in east London. We comply with all the tax rules in the UK."

According to The Sunday Times newspaper, foreign companies ought to be paying a total of about £5.5 billion in British corporation taxes -- a figure unconfirmed by Britain's government.