Fighting the fat cats
13.11.12 | Richard Brooks
“I am a satisfied customer,” veteran Labour MP Austin Mitchell informed Amazon’s public policy director Andrew Cecil. “I love the service you provide when you write to me saying: ‘having bought this biography of John Major, you may be interested also in Fifty Shades of Grey’”.
It was a rare moment of humour in the grilling that a committee of MPs gave a group of executives yesterday (12 November) over their American employers’ derisory British tax payments.
Combative committee chairwoman Margaret Hodge, waving her smartphone and referring to receipts for purchases from a very domestic-sounding Amazon.co.uk, established that her books were printed in the UK, stored in the UK, and distributed by British operations employing some 15,000 people in British warehouses.
Yet Amazon.co.uk, as well as being a website address, is a trading name for a Luxembourg company called Amazon EU S.a.r.L.. So when Mrs Hodge orders her latest reading material in her Barking constituency she does so from a company employing 500 people 300 miles away in a small northern European relic of various continental wars. But her book never goes near the Grand Duchy.
The upshot is that, while Amazon makes annual sales of around €9bn across Europe, around half of them in Britain, its UK company reports a turnover of just £207m and a tax bill of less than £2m.
What the MPs were unpicking was just one example of overseas multinationals running major, successful businesses in this country but stripping them down for tax purposes. In Amazon’s case, its UK business acts merely as a poorly-rewarded, and thus low-taxed, servant of a Luxembourg master.
Similar results are achieved by the companies represented by two more businessmen who sat alongside Mr Cecil (all three, incidentally, sporting poppies on 12th November as if to say ‘we’re good guys really’). MPs roasted Starbucks for removing all but a whiff of a tax bill by paying royalties for its brand to an affiliate in Amsterdam that has a special secret tax deal with the Dutch taxman. Google runs its European arm through an Irish base from which it sends profits off to Bermuda, about which its European chief executive Matt Brittin was commendably open.
The price of this tax scheming is not just the obvious loss to government coffers and public services. When Amazon’s Cecil tried to boast of the other taxes that his company pays, such as business rates, Hodge jumped on him. “Let me kill this argument because it really makes me cross . . . So does every other business. The community-based bookshop that you’re putting out of business also pays business rates, also pays its PAYE . . . And you’re making it uncompetitive”.
Defeating the scourge of tax dodging by the world’s biggest multinationals requires major surgery to both national and international tax laws. But despite the occasional encouraging noise the government shows no sign of scrubbing up to perform it. Until they do, we’ll have to settle for parliament’s more independent members dissecting the corpses.
Richard Brooks is the author of The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business coming from Oneworld in March 2013.