Tech firms lobby to keep open tax avoidance loopholes

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Tech firms lobby to keep open tax avoidance loopholes

Warwick Ashford

Big US tech firms are lobbying advisors to the G20 group of countries not to close tax loopholes exploited by firms such as Google, Amazon and Apple to pay less tax in the UK and other counties outside the US.

In June 2013, the UK led efforts to lobby the Organisation for Economic Co-operation and Development (OECD) for international tax rules to be brought up to date for the internet world.

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At the time, Treasury minister David Gauke told MPs that HMRC is constrained by international tax rules.

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

The move followed a call by the Public Accounts Committee (PAC) for a full investigation of Google’s alleged tax evasion practices in the UK.

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

G20 leaders subsequently asked the OECD to draw up reforms, but now the tech-dominated Digital Economy Group (DEG) has written to the OECD in an attempt to halt reforms.

Supporters of reform say that new technologies have opened up a host of possible corporate structures previously unimaginable.

But the DEG claimed enterprises that use digital communications do not organise their business operations differently as a legal or tax matter, reports the Guardian.

According to the PAC, Google paid just £3.4m in tax to HMRC in 2012 despite UK revenues of £3.2bn, just £935,000 tax on £239m revenues in 2011. and a total of £8m between 2004 and 2010.

While Amazon made more than £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.

UK retail groups have called for reform because of what they see as unfair tax advantages for multinationals such as Amazon afforded by outdated tax rules.

Some of Britain's largest retail groups have called for a crackdown on Amazon's tax arrangements, but the DEG told the OECD that international tax rules should not be altered to target digital companies, which would penalise their “operational innovation”.

"We believe that [digital] enterprises operating long-standing business models, subject to established international tax rules, should not become subject to altered rules on the basis that they have adopted more efficient means of operation," the DEG’s letter said.

The DEG’s letter comes ahead of an update on the issue by the OECD scheduled for 23 January.

According to some commentators, the political will for tackling tax avoidance by tech firms is fading and the issue is unlikely to feature prominently at the 2014 World Economic Forum annual meeting due to take place in Davos, Switzerland, from 22-25 January.


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