Britain is to clamp down on tax avoidance by major international companies after a parliamentary committee dubbed efforts by corporations such as Google, Amazon and Starbucks to minimize the amount they pay in the U.K. as "outrageous."
Britain accuses multinationals of not paying their fair share. Starbucks is reveiwing its approach to tax in the U.K.
"Global companies with huge operations in the U.K. generating significant amounts of income are getting away with paying little or no corporation tax here," said lawmaker Margaret Hodge, who chairs the public accounts committee. "This is outrageous and an insult to British businesses and individuals who pay their fare share."
Executives from Google (GOOG, Fortune 500), Amazon (AMZN, Fortune 500) and Starbucks (SBUX, Fortune 500) appeared before the committee last month, as it sought to illustrate the wider problem of corporate tax avoidance.
All three companies say they comply with U.K. tax laws but the pressure is beginning to tell. Starbucks said Monday it was reviewing its approach to taxes in the U.K. "We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," Starbucks said in a statement, adding that it will release more details later in the week.
The British government is stepping up efforts to close loopholes for big companies as an economic slowdown makes it harder to meet revenue targets and in the face of criticism from voters and local businesses who say they are paying an unfair share of taxes.
The U.K will spend an additional £77 million pounds to hire more specialist inspectors and investigators in the hope of collecting £2 billion more per year from multinationals and wealthy individuals. Transfer pricing arrangements used by global firms will also come under greater scrutiny.
"The government is clear that while most taxpayers are doing their bit to help us balance the books, it is unacceptable for a minority to avoid paying their fair share, sometimes by breaking the law," finance minister George Osborne said in a statement.
Britain is borrowing more than it expected this year due to the impact of slower economic growth on revenues. It has a tax gap - the difference between tax collected and tax owed based on the letter and spirit of the law - of £32 billion.
Source: CNN Money | Mark Thompson