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Thursday, May 16, 2013

Tax avoidance and international companies

Today's Independent reports the appalling fact that Amazon paid less in UK corporation tax last year than it received in government grants.

The paper says that its official company accounts have revealed that last year it paid just £3.1m in total taxes on sales of £4.2bn. Its corporation tax bill was £2.44m, less than the £2.5m it received from the Scottish Government in inducements to build a new distribution warehouse in Dunfermline. And it is not just them:

The news comes as MPs say Google employees have turned whistleblower to describe how the Internet search giant misleads Britain's tax authorities over how much business they carry out in this country.

Giving evidence to MPs on the Public Accounts Committee the head of Google sales in Europe Matt Brittin insisted that all its sales were completed in Dublin.

This allows the company to pay tax at a lower rate than if the sales were completed in the UK.

But MPs told Mr Brittin that they had been contacted by former employees who described the extent of sales operations in the UK.

This includes pay-slips showing UK based staff being paid substantial bonuses depending on their 'sales' and evidence that big clients were being dealt with almost exclusively in the UK.

I will be in the Hay Festival over the Whitsun bank Holiday weekend and have tickets to see Eric Schmidt, the founder of Google. There may be questions. I am looking forward to it.
There's a "that was easy" solution. On companies that pay less than a predetermined amount of tax relative to turnover - impose a turnover tax - i.e., a tax on gross sales. Say, 1.5% to 3% - now the incentive to use creative accounting techniques to avoid tax liability is gone in a puff of smoke. Gross Sales Tax. There, that was easy. cw
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