I saw this somewhat curtailed debate as an important opportunity for other Back Benchers to add more power to the
elbow of the Public Accounts Committee, chaired so forcefully by my right hon. Friend the Member for Barking (Margaret Hodge). The Committee has shone a powerful spotlight not only on multinational tax dodgers but, importantly, on the timidity of HMRC. I shall return to the subject of HMRC’s mindset a little later.
Controversy over profit-shifting is hardly new—it has rumbled on for years—but, with the G8 only just over, it is easy to forget that it is only a little over 12 months since the issue finally gained enough traction to be given a place on the national agenda. I think that the reasons for that are clear: it has happened because since the banking crash and the recession Treasury coffers are bare, because of the sheer cumulative scale of the avoidance, because of the sheer size of the deposits held by United States multinationals offshore—at the last count, $83 billion was held offshore by Apple, the biggest of them all—and because the companies themselves are so brazen. Eric Schmidt of Google said that he was proud of what the company had done. He said:
“It’s called capitalism. We are proudly capitalistic.”
This year, Apple put its money where its mouth was silent. In May, in the world’s biggest corporate bond issue, it raised $17 billion in the United States. Given the comfort of its offshore cash pile, it will pay even less tax, because the interest is tax-deductible.
It is cheaper to borrow than to pay tax in those companies’ universe. They are perhaps not so much “immoral”, as they were memorably described by my right hon. Friend the Member for Barking (Margaret Hodge), as entirely amoral. However, HMRC is so meek that legislators would not have the necessary ammunition without investigative journalists and campaigners prying into the shadows. It was a close friend and former colleague of mine, Ian Griffiths, who combed Amazon’s accounts in Luxembourg and the United States last year. “A great deal for Amazon: £7 billion sales, no UK corporation tax” was the headline on the front page of The Guardian. In February last year, Simon Duke wrote an in-depth piece in The Sunday Times about Facebook entitled “The Anti-Social Network”. He tracked the way in which the social website had deliberately organised the avoidance of millions in tax, routeing revenues through Dublin à la Google. A series of exposés followed on different companies—“the untaxables”, as the newspaper called them—and kept up the pressure.
The third journalistic push came from Reuters, an organisation for which I once worked as a journalist. Following his investigation of Starbucks, Tom Bergin revealed that rather than reducing sales booked in the United Kingdom, like Google and Amazon, it loaded its United Kingdom operation with so many costs that little or no UK profit was apparently made. Two campaigners have also been at the forefront of these investigations: Richard Brooks, a former tax inspector, and Richard Murphy, an accountant and founder of the Tax Justice Network. I urge the people at HMRC to read their recent books closely, as I entirely agree with the PAC report of last year that criticised the mindset of HMRC in not being more assertive in pursuing multinational tax avoidance.
We have heard about how absurd it is for HMRC to accept the way that Amazon does business; that flies in the face of common sense. Despite the scale of its operations here, its overseas Luxembourg subsidiary is
not classed as having a permanent establishment. It is important that the OECD changes the rules as they are outdated, but we should not let our attention simply be deflected internationally as there are plenty of things we can do here. There is plenty that HMRC can do. To see that only takes an examination of its rule book, and the double tax treaty with Luxembourg, and the test it applies. With the tools at its disposal, it can push harder here and now, to pursue this issue and raise billions of pounds for the hard-pressed coffers of the Treasury.
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