MPs Say HMRC Failing To Police ‘Immoral’ UK Tech Tax Arrangements

The Public Accounts Committee (PAC) has called for the aggressive pursuit of multinational companies that use legal loopholes to minimise their UK tax bill, and has accused HM Revenue and Customs (HMRC) of not doing enough to police the tax system.

Technology companies such as Google, Facebook, Amazon and eBay have all come under fire recently for their tax arrangements, some of which been described as “immoral” by the PAC, which added that “transparent, predictable and fair taxation is at the core of our public finances”.

The PAC said it looked at a range of issues among HMRC’s activities but that its principal enquiries were into the corporation tax paid by multinationals in the UK. It concluded that international companies were “exploiting national and international tax structures” and that the practice was widespread.

War on corporation tax minimisation

“HMRC is not taking sufficiently aggressive action to assess and collect the appropriate amount of corporation tax from these multinationals,” said the PAC. “If companies do not pay their fair share of tax, other taxpayers have to pay more. Both HMRC and corporate taxpayers are failing to meet the legitimate public expectations from the tax system.

“We are concerned that multinationals have an unfair competitive advantage over British businesses which have no choice but to pay their corporation tax.

“It is also unclear whether HMRC have the necessary resources or are devoting the time and effort to collect the appropriate level of tax.”

The PAC estimates that the gap between the amount of tax collected the amount it believed should be collected was around £32 billion, a figure that had only been reduced by £1 billion since 2004-05. However, the committee acknowledged that pursuing the matter was the duty of more than just HMRC. It called for legislative changes to increase international cooperation and a requirement for multinationals to be transparent with their practices.

Possible prosecutions

Amazon has been a particular target of the PAC as the online retailer reportedly pays no corporation tax on the £3.3 billion of sales it makes in the UK. Amazon operates as a pan-European company based in Luxembourg, and that Amazon UK is merely a “trade name” used by that company. Amazon’s UK employees, meanwhile, are for tax purposes considered a mere “service company” providing services to Luxembourg-based Amazon EU Sarl.

Google has also come under fire for paying just £6 million on revenues of £395 million in the UK. This is achieved by operating its UK business as an agent for its business in Ireland, where taxes are lower.

“Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax here,” said Margaret Hodge MP, chair of the PAC. “This is outrageous and an insult to British businesses and individuals who pay their fair share.

“Prosecutions should be mounted where necessary and offenders should be publically named and shamed.”

 Do you know Google’s secrets? Find out with our quiz!