The short answer: Not likely.
In November last year, The Public Accounts Committee (headed up by MP, Margaret Hodge) brought in representatives from 3 well known global corporations; Starbucks, Amazon and Google. The reason being – these 3 companies pay virtually no UK tax in comparison to their earnings. Despite it being lowered in the March 2013 budget to 20%, the level of corporation tax in the UK at the time was 24% for companies earning over £1.5m. Amazon only paid 2.5% on their UK earnings whereas Google and Starbucks paid less than 0.5% in tax!
All 3 representatives were pretty poor at defending their company’s position and repeatedly referred to the fact that tax avoidance isn’t illegal – it’s using legal loopholes to avoid paying it. Margaret Hodge, as well as other committee members, kept trying to reiterate that just because it is technically legal, doesn’t mean that the companies should exploit it.
The biggest disaster of the day was Andrew Cecil, Director of Public Policy, representing Amazon. Cecil couldn’t answer a single question and played dumb when it came to Amazon’s UK earnings, staff or company structure. As a result, Hodge claimed that he was wasting the committee’s time and said they will ask Amazon to return to the committee with a member of staff who knew what they were talking about.
As fun as it was to watch these corporate suits being grilled on their immorality – I didn’t expect anything else to come of it after the committee meeting; it seemed like it was just a public slap on the wrist for the companies involved who would continue to rack up massive UK profits and do nothing about it. As mentioned earlier, they were all rewarded with a 4% drop in corporation tax – as if that even affects them.
Starbucks agreed to voluntarily contribute some money to the HMRC (which was made up by a decrease in employee conditions) and Eric Schmidt (CEO of Google), as pointed out in Private Eye a few weeks later, was awarded a £50m investment by old friend, George Osborne, for a big technology centre in the heart of London. Well done Google.
However, this week the Public Accounts Committee has ordered Google back to answer further questions regarding tax avoidance. Brittin, a high-up in Google who represented them in November, may have misled the committee by down-playing the role of which Google’s UK staff play. Apparently, Google’s UK staff act as consultants to negotiate sales deals with advertisers whereas the staff in its Dublin HQ actually perform the sales. This is in contrast to its job descriptions and several of its UK staff’s LinkedIn profiles. As a result, they will need to return to face more in-depth questioning surrounding their interests in the UK.
This is a waste of everyone’s time and money. Eric Schmidt, although defending tax avoidance, has said in an interview to the BBC that if legislation changed and was harsher, Google would happily oblige. Also, if we gave them an ultimatum of paying the 20% rate or not operating in the UK – do you really believe Google would pull out of the UK? Of course they wouldn’t. The PAC should have more authority in enforcing penalties or commitments on these large companies – the UK is a strong market which any global corporation can’t exactly afford to be missing out.
And what about Amazon? There is no mention of them being summoned back despite a clueless and pitiful performance last time. Have they been let off the hook?
I understand that nobody likes paying tax – but as we all know, it is just a part of life. You work – you pay tax. If you don’t then the repercussions are relatively catastrophic for you; the metaphorical taxman isn’t easily tricked. So it isn’t exactly fair that just because a company reaches a certain status, such as that of Google, Amazon, Starbucks, McDonalds etc. that they are allowed to abide by a different set of rules. These are companies which you and I may work for and we have to pay our tax and NI on every pay-check.
So, what do I think the outcome of this next meeting will be? That Google’s representative breaks down in tears, apologies to the British government, and takes a nice 20% slice out of his profit pie and gives it to HMRC? No, not exactly. I don’t think anything will come of this except a little public humiliation – but how is public humiliation going to stop anybody in the UK from going to Google to perform a web search? It isn’t.
Google will carry on defending their position on tax avoidance, the PAC will continue to rear its head once in a while with a vocal complaint and a 5 minute grilling, the HMRC will carry on being lenient with companies earning vast amounts of UK profit while coming down on small businesses like a tonne of bricks and we will all carry on earning pennies and being taxed on every single one.