Amazon et al must stump up and pay their fair share of tax on the huge sales they make here in the UK. Leona Helmsley’s infamous quote that ‘only little people pay taxes’ springs to mind as we hear about how a corporate giant like Amazon has exploited international tax structures to avoid paying taxes. Also, HM Revenue and Customs must be more proactive in challenging tax arrangements like these.
Internet giant Amazon was pathetic when its representative came before the public accounts committee recently and stonewalled when facing questions from myself and others. Today, the committee has published its report into HM Revenue and Customs and has shed light on multinational companies that exploit international tax structures to avoid paying their fair share of tax.
Amazon has avoided paying British corporation tax on products sold on amazon.co.uk by directing sales through a company based in Luxembourg where the tax rate is lower. Amazon.co.uk Ltd, the branch of the firm registered in the UK, has paid just under £2.4m in corporation tax over the last two years. Yet in 2011, £3.35bn of sales were from the UK alone, 25 per cent of all international sales outside of the USA.
The committee believes that HM Revenue and Customs have been too lenient in its treatment of multinational corporations. It is uncertain whether HM Revenue and Customs has devoted enough resources to ensuring firms pay a reasonable rate of tax on the business they conduct in the UK, meaning that the Treasury has potentially missed out on a great deal of revenue, and British companies, who have no option but to pay full British corporation tax, are at a major disadvantage.
The chancellor’s announcement of £77m a year for two years to chase companies which avoid paying tax is long overdue and strategically timed to take some heat from his autumn statement on 5 December, which will show tax revenues down and the benefits bill up as the economy has flatlined.
Although not covered in the media today, the public accounts committee had further worries about HMRC relating to the rollout of ‘real time information ‘and changes to child benefit next April. We found HMRC complacent about its ability to cope. From April employers will send PAYE data electronically to HMRC each time they pay their employees as part of routine payroll processes rather than sending a separate return at the end of the year. RTI will also provide up-to-date information about wages and tax for forthcoming universal credit, so eligible employees will get the right amount of benefits.
Independent witnesses told the PAC these changes will increase the burden on small businesses and mean more people registering for self-assessment. So we want to know how HMRC will help small businesses to manage this burden. Plus we want details of their contingency planning if the rollout does not go according to plan.
PAC also found, astonishingly, that HMRC is still not getting a grip of error and fraud in tax credits, which totalled £2.46bn in 2010-1. Significant improvements must be made before universal credit is introduced or needy families could miss out on essential support.
All in all HMRC has to raise its game at every level.
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Nick Smith is member of parliament for Blaenau Gwent, member of the public accounts committee, and member of the Progress strategy board
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