MPs were critical of deals that appear to show firms diverting apparently British transactions through overseas divisions in low-tax countries. Members of the Public Accounts Committee accused the firms respectively of being “frustrating”, “deceptive” and “immoral”. There is no suggestion that the firms involved are breaking the law with their arrangements.
Troy Alstead, Starbucks’ finance chief, admitted that the firm has not paid any UK corporation tax since 2008. But he said this was because of long-term “profitability challenges” that meant the UK business had always struggled to produce a surplus – despite other executives telling analysts it makes money.
“I assure you we are not making money. It’s very unfortunate,” he added. This led Labour MP Austin Mitchell to declare: “You’re either running the business very badly or there’s some fiddle going on.”
Alstead revealed that Starbucks has a tax arrangement with the Dutch authorities that covers the 4.7 per cent royalty on profits paid by UK stores to its main European business. He also said that all of his firm’s coffee is bought by a team of 30 workers in Switzerland, where they benefit from a favourable tax regime. The traders charge a 20 per cent mark-up before selling it to UK stores.
Andrew Cecil, public policy director at Amazon, defended his company’s decision to send all its European transactions through one Luxembourg business, which meant the firm paid no UK corporation tax last year.
But he could not answer questions on the value of UK sales or who owned the Luxembourg business.
Google vice president Matt Brittin told MPs his firm “pay the tax we’re required to pay in every country we operate in, including the UK”. He explained almost all UK purchasers of its products dealt directly with its sales force in Ireland – which has a low corporation tax rate – while “all the technology which creates the economic value comes out of California”.
Brittin said that sending worldwide profits through a Bermuda subsidiary helps the firm “manage costs efficiently in order to satisfy our shareholders”.