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The firms under fire for dodging UK tax

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30/01/2013
We take a closer look at some of the companies hitting the headlines for allegedly failing to pay their fair share of tax.

Certain companies have in recent months been in the line of fire for their aggressive tax planning practices.

Several multinational company bosses have been hauled in front of MPs to explain themselves. Both the Prime Minister and the Chancellor are now adamant that they will close the UK’s £32bn tax gap.

As these companies get blasted for their lack of ‘moral code’, we highlight the ones which have incensed the public the most.

Starbucks 

Starbucks has become the taxman’s favourite naughty kid on the block to be scolded over ‘what not to do as a large multi-national’. 

One of the largest coffee chains in the UK, and the second largest café or restaurant chain in the world after McDonald’s, is now just as well known for tax avoidance as it is for its coffee.

In the last three years Starbucks, despite it’s size and prominance, paid no corporation tax on UK sales of £1.2bn.

Over the last 14 years it has only paid £8.6m in corporation tax. Seem paltry? It is.

The coffee chain shifted money between Starbucks companies in different countries so that its accounts show it made a loss in the UK.

According to campaigners, UK Uncut, because of the way it has done this inside its global corporate empire no one knows exactly how much tax Starbucks should actually have paid.

Comparing Starbucks to other similar US-based multinationals, McDonald’s had a tax bill of over £80m on £3.6bn of UK sales, while Kentucky Fried Chicken incurred taxes of £36m on £1.1bn in UK sales.

Starbucks has since tried to redeem itself, after coffee sales slumped in consumer protest, and has now pledged to pay £20m over the next two years.

 

Vodafone

For the last ten years Vodafone has not paid the UK government a tax bill of around £6bn.

Court case followed court case, and eventually HM Revenue and Customs (HMRC) won a decisive victory. Vodafone was on the ropes and all that was needed was a couple more government knocks to finally make the communications giant pay up.

But instead the exchequer let Vodafone off, causing a wave of controversy.

At a time when the government is insistent on massive cuts in public spending, the deal was particularly hard to swallow.

Vodafone faced a similar tax issue in India, but the taxman in the sub-continent doggedly chased the company until it got its tax.

Amazon

The biggest online retailer in the world announced on Tuesday that it enjoyed a bumper Christmas, with international sales up 20% to a record £5.8bn.

However, Amazon’s strength in Britain is contentious due to the fact it paid a relatively tiny amount of UK corporation tax.

The company has paid HMRC just £2.3m over the past three years despite making £7.1bn in sales.

It admitted in front of MPs last year to using the tiny state of Luxembourg as a base for its European operations due to the favourable tax rate.

It claimed that Luxembourg, where it employs 500 people, is the real ‘engine’ of the business, rather than the UK, where it employs 15,000.

Google

Modern society seems rather redundant without Google’s helping hand in all aspects of life. It has become so popular over the past decade; ‘to Google’ is even a verb.

But the web giant is less than smear free. It funelled £6bn through Bermuda last year, halving its 2011 tax bill and paying £1bn less to government coffers.

However, Google can be commended for being frank about the way it deals with its tax planning.

 

Apple

Who doesn’t have some sort of exposure to Apple nowadays? Whether it’s your phone, TV or PC, most of us get more exposure to Apple products than we do the sun.

But the world’s second biggest company paid $713m (£445m) in corporation tax abroad from September 2011 to September 2012, despite profits growing to a $36.8bn outside America.

The technology giant’s overseas tax rate fell to 1.9% from 2.5% the year before, significantly below the corporate tax rate of 35% in the US and 24% in Britain.

Apple uses legal tax avoidance strategies, channelling much of its British and European business through a subsidiary in Ireland.

Apple is estimated to have avoided more than £550m in tax in Britain in 2011. Its latest accounts show UK turnover at just over £1bn and profit at £81.3m, generating a tax bill of £14.4m.

However, analysis of its filings in America suggest a more realistic figure for UK turnover is £6.7bn. This would imply an estimated profit of £2.2bn and, at the then corporation tax rate of 26%, a £570m tax bill, the Sunday Times reports.

 

Should investors boycott tax-avoiding companies? 

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