Tax avoidance?

A trio of executives were met with disbelief, distrust and disgust by MPs from the powerful Commons Public Accounts Committee (PAC) over explanations about the controversial tax arrangements of their employers.

Troy Alstead, the global CFO of Starbucks – the US company which paid no UK taxes for the past three years, despite sales of £1.2bn faced the wrath of PAC chair Margaret Hodge when he said Starbucks had made a profit just once in the 15 years of trading in the UK.

An incredulous Hodge replied:

‘You have run the business for 15 years and are losing money and you are carrying on investing here. It just doesn't ring true.’

‘I assure you we are not making money,’ Alstead told MPs. ‘It's very unfortunate. We're not at all pleased about our financial performance here. It's fundamentally true everything we are saying and everything we have said historically.’

The Starbucks exec, denied the company was engaged in aggressive tax avoidance measures but admitted that his corporation had signed a highly favourable- but secret - tax agreement with Dutch authorities.

A Reuters report last month revealed the coffee chain’s UK operation had made a loss of £52m in its 2009 accounts field at Companies House, despite it telling investors that the UK company was ‘profitable’.

Next up to give evidence was Andrew Cecil, Amazon's director of public policy.

Amazon – the UK’s biggest online retailer – amassed sales of over £3.3bn in the UK last year, yet paid no corporation tax on any profits. The company is currently being probed by HMRC.

He said that despite the fact that Amazon UK had 15,000 employees it was headquartered in low-tax Luxembourg, where it had just 500 staff.

An increasingly frustrated Hodge told Cecil he was not a ‘serious player’: ‘We need proper answers to proper questions’, after he repeatedly said he would have to revert back at a later date with the information requested by the MPs.

This included the value of Amazon's sales in the UK, the European company’s pre-tax profits and the ownership structure of the European company.

Search engine giant, Google paid just £6m of corporation tax in the UK last year on a UK turnover of £395m.

Its chief executive of Google northern Europe, Matt Brittin, was quick to admit that its European HQ was based in Ireland because of its 12.5% corporation tax rate – almost half that of the UK’s 24%.

He added that until very recently, the Irish company was paying a fee to a Dutch-registered company within Google in a bid to slash its tax burden.

He said the rights to Google’s non-US intellectual property rights were held in the sun-kissed tax haven of Bermuda, to minimise costs to shareholders.

Brittin told the committee his employer was behaving perfectly legally.

Hodge duly retorted:

‘We're not accusing you of being illegal, we're accusing you of being immoral.’

The former Trinity Mirror executive said the firm’s primary driver of commercial “value” was the 17,000 California-based engineers who create the company's innovative technology and not the selling of advertising via Ireland.