Multinational Companies Accused of Tax Avoidance

The UK branches of Starbucks, Amazon and Google UK will face questions, because of tax avoidance accusations. All of them have been suspected to have been paying little or no tax on their UK earnings. The overseers of government financial issues , the Public Accounts committee will meet the executives of these companies and investigate the case, where companies have been accused of seeking various means to avoid paying the required amount of taxes, defined by the UK legislation. Matt Brittin, the chief executive of Google UK, as well as Starbucks chief financial officer Troy Alstead and Amazon’s director of public policy Andrew Cecil, will speak before the committee, which is headed by Margaret Hodge.

Generally, multinational companies, like the stated above usually seek ways to pay as low tax as possible. For example they settle the company in low-tax jurisdiction countries, which legally allows them avoid paying taxes in the countries in which they do the majority of their business.

The question is then which country’s tax authorities should get the tax receipts and over what share of the sales.

For that reason there is a great complexity in dealing with tax law issues- it is difficult to define how much tax should each company pay and where.

The investigations over Starbucks, Amazon and Google UK shows that during a 14-year period, Starbucks paid £8.6m corporation tax, they are also found claim  accounting losses when it was profitable. Google UK is claimed to have paid £6m tax in 2011, with a turnover of £395m and Amazon is reported to have paid no tax, despite profits of over £3.3bn, as the company has been transferred to a Luxemborough-based firm.

Starbucks, Amazon and Google UK are not the only multinational companies suspected in tax avoidance schemes. Multinational companies such as eBay, Apple and Facebook also have faced some controversy over their tax contribution to the UK. For example Facebook in the Uk has paid only £238,000 in tax last year, by having its European base in Dublin, where tax is considerably lower than elsewhere in the UK. Apple is reported to have paid less than 2% corporation tax on its profits outside the UK and eBay is claimed to have paid £1.2m in tax in the UK.

Former City minister Lord Myners has claimed that the current tax regime isn’t working, saying: “Corporation tax for an MNC [multinational company] operating in the UK is close to being a voluntary payment.”

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