Derail the tax GRAVY TRAIN
As three tech giants pay just £10m in corporation tax between them – less than half the bill for homegrown firms like WHSmith – we demand fair play. It’s time to...
THREE of the world’s biggest technology giants that have changed the face of life in Britain pay less than £10 million a year in corporation tax – a fraction of payments made by homegrown firms.
Amazon, Facebook and Airbnb paid just £ 6.8 million combined, acccording to company documents, despite their vast scale and global valuation of more than £1 trillion between them.
It’s a stark contrast to high street et retailers such as WHSmith, which h generates sales of £1.2 billion and d £140 million profit and has a tax bill ll of £ 24 million. That’s more than n twice as much as Amazon, Faceebook and Airbnb combined.
Today The Mail o n Sunday y launches a campaign demanding an n overhaul of Britain’s corporate tax x system. With next month’s Budget t just four weeks away, Chancellor r Philip Hammond last night faced d calls to address ‘ deeply unfair’ r’ rules that mean the UK operates s what experts refer to as ‘an honnesty box regime’.
Corporation tax in the UK is set at 19 per cent of a company’s profits. s. But online giants such as Amazon and Facebook appear to be paying far less than that. Research by The Mail on Sunday found that in many cases this means their effective tax rate on UK profits is less than 10 per cent.
Multinational firms often slash their tax bills by funnelling UK profit through low-tax jurisdictions including Ireland, Luxembourg and the Cayman Islands. This can be done perfectly legally by paying interest on debt or channelling fees to companies outside the UK for use of the company name or its technology.
Some get away with paying nothing at all. Astonishingly, under current rules, they can keep details of these practices private. In some cases published accounts of tech firms appear to bear no resemblance to the sales and profit that experts suspect they are actually making here.
Hammond was last night accused of so far failing to act on promises from the highest ranks of Government to ‘rebalance the tax system’. He faces further embarrassment for making only slow progress with Facebook, Uber, Twitter and Airbnb which are all due to publish fresh accounts in the coming weeks which will heap yet more pressure for change in the run-up to the Budget on October 29.
As well as effectively paying much higher corporation tax rates, companies which have a large physical presence on high streets, offices and industrial estates pay extra property taxes. Business rates – the corporate equivalent of council tax – can add up to many millions of pounds for the more expensive buildings. High street retailers in particular are finding it impossible to compete. By contrast, digital companies such as Facebook face much smaller business rates bills because their services do not require as much physical space.
The Mail on Sunday is calling on the Chancellor to recognise and address these inconsistencies in the Budget next month.
The Government has put huge resources into cracking down on tax avoidance schemes used by individuals. Now Hammond must ensure that domestic firms can compete fairly with rivals, particularly those that operate online. He must also force companies to come clean on their activities and profits in each country where they operate.
Robert Palmer, head of Tax Justice UK, said: ‘It’s deeply unfair that big companies can slash their tax bills while most Britons don’t have this option. This is not just about the choices of individual companies, but how the tax system is set up in the first place.’ He added: ‘We need more transparency to know what’s going on inside these companies and a fair corporate tax rate to make sure they pay their way.’
Amazon says its UK business brings almost £9 billion in annual sales for its Seattle, US-based parent, around 6.4 per cent of its global revenue. But according to available UK accounts for Amazon Services UK, its warehousing and logistics division, it only makes £72.4 million of its $3 billion (£2.3 billion) profit here – about 2.4 per cent. On that it paid £1.7 million in tax, documents show.
Amazon Services UK is a subsidiary of Amazon EU Sarl which is based in Luxembourg.
Facebook’s UK business contributed just £5.1 million to the Exchequer in 2016 despite UK revenues jumping from £ 210.8 million to £842.4 million. Facebook’s pre-tax profits were £58.4 million – giving the company an effective tax rate of just 9 per cent. Facebook said it was ‘compliant with UK tax law’ and that it had reorganised its structure in April 2016 ‘to record revenues from our large UK sales customers’ and provide ‘greater transparency.’ Airbnb paid just £188,000 in tax through one of its subsidiaries – Airbnb Payments – last year and paid zero corporation tax through its other subsidiary, Airbnb UK.
Richard Murphy, at Tax Research UK, believes the UK has such a ‘ lax’ approach to tax that it is ‘basically an honesty-box regime’. Murphy said: ‘ There is obviously a problem with these large corporations.’
He claimed many ‘ pure tech’ firms are ‘under-declaring’ profit, while others appear not to be paying VAT. Some use intercompany payments to reduce tax liabilities or else pay debt interest to reduce or wipe out UK profits. The transfers are almost always done through tax havens.
Murphy added: ‘We operate as a corporate tax haven and we don’t regulate companies in any effective way. Whether companies pay tax is basically a matter of choice.’
A Treasury spokesman said: ‘We have to rebalance the tax system to be fair for all businesses. If we can’t get international engagement to do this, we may have to look at temporary tax measures.’
The Treasury said it had introduced measures to force large firms to produce a country- bycountry report of their profits and tax to HM Revenue & Customs.