UK warns multinationals on tax avoidance
Government tells firms corporate tax not a ‘voluntary’ issue
By Gaurav Sharma | CFO UK | Published 15:26, 10 December 12
Chief secretary to the Treasury Danny Alexander has warned multinational corporations operating in the UK that paying corporation tax is an obligation and not "a voluntary choice" companies can make to appease customers.
His warning came in a BBC interview broadcast on Sunday, following coffee chain Starbucks' announcement that it would pay more UK corporation tax in the face of a consumer backlash as revelations of tax avoidance surfaced.
Starbucks said last week that it was 'meeting' its UK tax obligations but was making a voluntary decision to pay more tax on its British earnings. It also took out full-page advertisements in all major UK newspapers claiming that it would do more in wake of the public backlash.
This followed revelations last month that it sold nearly £400 million worth of goods in the UK last year, but paid no corporation tax at all because it transferred some of the money to a sister company in the Netherlands in the form of royalty payments.
Starbucks also confirmed that all its businesses worldwide, including in the UK, actually buy their coffee from its Switzerland office. The company has paid just £8.6 million in corporation tax in its 14 years of trading in the UK, and nothing in the last three years.
While welcoming Starbucks' move as an important first step, Alexander said, "Taxation for big companies, or for anyone in society, can't be, and mustn't be, a voluntary arrangement. Thinking of the tax system as if it is like the church plate going around on a Sunday morning is completely the wrong way to think about it."
"Paying tax is not a voluntary choice, it is not something you can just chose to do willy-nilly because you think it will please your customers, it is an obligation," he added.
Other multinationals in the firing line include ebay, Google, Amazon, Facebook and Apple. Government contractors Capgemini and Accenture have also been pulled into the UK tax row. All bar Amazon and Google, who said they will not be following Starbucks' lead, have declined comment.
But Alexander said that the UK government, together with Germany and France, was putting additional funds into the OECD, to help with work on establishing global agreements to prevent companies avoiding tax by moving profits from one country to another with a lower tax rate.
"At a time of austerity, everyone has an obligation to play by the tax rules," he added.
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