Executives from Starbucks Corp., Amazon.com Inc. and Google Inc. came under attack Monday from British lawmakers who accused the U.S. companies of using complex accounting methods to reduce their tax liabilities in the U.K.
Parliament’s Public Accounts Committee questioned statements of how much profit the companies were making in Britain. Starbucks Chief Financial Officer Troy Alstead was told his assertion that the coffee chain continually made losses in Britain “just doesn’t ring true,” while Amazon’s director of public policy, Andrew Cecil, was “not credible” when he declined to give details of sales generated in the U.K.
“Your entire economic activity is in the U.K., yet you pay no tax here,” Margaret Hodge, the opposition Labour Party lawmaker who heads the committee, said during an exchange with Cecil at the hearing in London yesterday. “You are not putting enough tax back into the economy.”
The testimony at times drew laughter from members of the cross-party committee who queried how Amazon made 20 million euros ($25 million) profit on sales of 9.1 billion euros across Europe last year and questioned why Starbucks remained in Britain. Starbucks has paid no corporation tax in the U.K. over the past three years and has recorded losses for most of the 15 years it has been operated in Britain. Google paid 6 million pounds ($9.5 million) in tax last year.
The hearing reflected public anger with large corporations that are minimizing tax bills at a time when the U.K. is driving through the biggest budget cuts since World War II to narrow the fiscal deficit. Chancellor of the Exchequer George Osborne said last week he wanted clearer international rules to help reduce tax avoidance.
Starbucks “has every intention” to make its stores in the U.K. profitable, Alstead said. “There’s no tax avoidance here. We have a global tax rate of 33 percent around the world.”
He angered lawmakers by refusing to publicly give details of a “low-tax” rate granted by the government in the Netherlands on payments from its U.K. business, saying the Dutch authorities wanted it to remain confidential.
Hodge told Cecil his answers were “not acceptable” and that the committee would be ordering “a serious person” from Amazon to appear before the committee next week.
Matt Brittin, vice president for Google’s northern Europe’s operations, said that the company pays “all the tax that it is required to.” He said the company paid 6 million pounds on 396 million pounds of sales in the U.K. in the 2011 fiscal year.
“We are not accusing you of being illegal, we are accusing you of being immoral,” Hodge said. Labour’s Fiona Mactaggart said the company was not “matching up” to its motto to “do no evil.”
The British government has pledged to crack down on what it sees as abusive tax-avoidance schemes, including a Barclays Plc plan that denied the Treasury more than 500 million pounds.