12 Nov 2012

Starbucks, Amazon and Google grilled by MPs on tax

Representatives of the three international companies are called before MPs to face charges that they were using legal but undesirable methods to minimise tax payments in the UK.

MPs called the executives to the Commons public accounts committee as part of its investigation into who pays what tax in the UK.

The MPs were indignant, the executives humble – but they maintained there were valid reasons for their legal tax arrangements, other than tax avoidance.

First up was Starbucks global chief financial office Troy Alstead, who was told his claim that the coffee chain continually makes a loss in Britain “just doesn’t ring true” – especially when Starbucks tells investors that the company is profitable.

Your entire activity is here yet you pay no tax here and that really riles us, it riles us. Committee Chair Margaret Hodge

Mr Alstead denied lying to shareholders over the chain’s accounts. But he did admit that the company had a special tax arrangement with the Dutch government on its European headquarters. “It’s a favourable tax rate that we have in the Netherlands,” he admitted to MPs. “It’s not why [we’re there], but it’s an attractive reason to be there.”

Google later confirmed that it used low tax rates in the Republic of Ireland for the same reason, while Amazon’s sales are operated from Luxembourg.

Matt Brittin, chief executive officer of Google UK, and Andrew Cecil, public policy director at Amazon, were also questioned by MPs after a wave of revelations about the tax affairs of international companies.

‘Competitive’ UK coffee market

The global coffee chain reportedly paid nothing in corporation tax to the UK over the last three years and has filed losses with Companies House for most of the years it has been operating in the UK – but it has been reporting accounting losses when it was profitable, according to a 14-month investigation by Reuters.

Mr Alstead insisted that the company has been floundering in the UK market. “The single most competitive coffee espresso market we face is right here in the UK,” he said. “We’re not at all pleased about our financial performance here.”

But Committee Chair Margaret Hodge questioned why, then, the company told shareholders that the UK arm was profitable: “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.”

Mr Alstead said that Dutch authorities wanted the detail of its agreed tax rate to remain confidential, prompting allegations it was a “sweetheart” deal that bosses wanted to keep under wraps.

Labour MP Austin Mitchell faked sympathy for the global coffee chain after its pleas of financial difficulty. “My heart has begun to bleed for you,” he said. “I am going to have to walk down Victoria Street and have a double caramel macchiato because you are in such a bad way.”

Amazon ‘paid no tax’

Andrew Cecil, public policy director at Amazon, was then given a verbal mauling for failing to answer a string of questions about the company.

MPs lambasted the public policy director for repeatedly claiming he did not know basic information about the company or refusing to make it public.

He was told it was “unacceptable” that he was unable to explain the corporate structure of the internet shopping firm when he admitted he did not know who owned a Luxembourg-based holding company.

Amazon will be called back to the committee to answer the questions that Mr Cecil failed to give.

Committee Chair Mrs Hodge said: “Your entire activity is here yet you pay no tax here and that really riles us, it riles us.”

Mr Cecil attempted to defend the company, telling MPs Amazon did pay some corporation tax and also paid more than £100m in payroll taxes and tens of millions in business rates. But Mrs Hodge hit back, accusing the firm of putting local bookshops out of business by playing the system.