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UK leads calls for internet era tax laws

Warwick Ashford

The UK is leading calls for international tax rules to be brought up to date for the internet world, to remove the loopholes exploited by firms like Google and Amazon to avoid paying UK tax.

Earlier this month, the Public Accounts Committee (PAC) called for a full investigation of Google’s alleged tax evasion practices in the UK.

The PAC also said it wants to see multinational companies paying more tax where their customers are located.

In response to these and other calls for reform, Treasury minister David Gauke has told MPs that HMRC is constrained by international tax rules.

But, he said the UK was leading efforts to lobby the Organisation for Economic Co-operation and Development (OECD) to get those rules updated, according to the Guardian.

This is the firmest indication yet of the government’s determination to stamp out corporate tax evasion, the paper said.

Gauke said there were shortcomings in international tax guidelines, specifically in what constitutes a business taxable in the UK under "permanent establishment" rules.

Google has paid what seems a small figure for a number of years to the UK government, with just a £935,000 tax bill on £239m revenues in 2011 and a total of £8m between 2004 and 2010.

Amazon made over £3.3bn in sales in 2011, but paid no corporation tax in the UK and Starbucks has paid just £8.6m in its 14 years of trading in the UK.

Google and Amazon are currently routing their UK business through Ireland and Luxembourg respectively so that little or no tax is payable in the UK.

Both companies claim they are not doing anything illegal because UK staff are fulfilling a support role to staff in Ireland and Luxembourg that are actually closing sales.

Google’s defence was undermined earlier this month when former employees told the PAC that UK-based staff members are engaged in selling advertising, prompting calls for further investigation.

Last week, the OECD presented to G8 leaders meeting in Northern Ireland the steps needed to create a fairer and more transparent global tax system.

In July, an OECD action plan is to be presented to a G20 meeting of finance ministers, which may include some of the sought-after reforms in the light of the Treasury minister’s comments this week.


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