Consumers urged to boycott firms

CONSUMERS have been urged by a senior MP to boycott Starbucks, Amazon and Google in protest at what she says is “immoral” avoidance of UK tax.

Margaret Hodge backed direct action to punish the well-known firms after they failed to convince a Commons spending watchdog that they were paying a “fair share”.

“I think one should boycott these companies. I do actually think that is the right thing to do,” she said after leading a fiery three-hour grilling of executives.

Sign up to our Business newsletter

Sign up to our Business newsletter

All three firms were forced to defend arrangements which have seen them pay little or no corporation tax in the UK despite extensive operations here.

They denied that basing themselves in lower-tax countries amounted to aggressive tax avoidance and insisted they were complying fully with the law.

But public accounts committee chair Mrs Hodge told the BBC World Service none had been “able to convince us that, given their level of activity in the UK, they were paying a fair share.

“They were, in different ways, siphoning the profits out of the UK to low-tax jurisdictions.”

Starbucks has reported a profit from its UK business only once in 15 years, something Mrs Hodge said at yesterday’s hearing “just doesn’t ring true” and could only be a tax dodge.

The coffee giant has reportedly paid just £8.6m in corporation tax in 14 years of trading in Britain - and nothing in the last three years.

Global chief financial officer Troy Alstead conceded that a tax deal struck with the Dutch authorities was “an attractive reason” for basing the coffee company’s operations there.

A 4.7 per cent “dividend” is sent there out of pre-tax UK revenue and outlets also pay a 20 per cent mark-up on coffee bought via Switzerland where the firm pays only 12% tax on profits.

But Mr Alstead insisted that the UK business was genuinely unprofitable because the firm made an over-aggressive entry to the competitive market and ended up with expensive properties.

“Respectfully, I can assure you there is no tax avoidance here,” he told the MPs.

“We have a global tax rate of 33 per cent around the world. Our tax rate outside the US is 21 per cent. That is higher than most multinationals’ global rate. We are an extremely high tax payer.”

Mrs Hodge mocked the argument: “I don’t think anybody running a business would keep that business going and keep investing if they weren’t making money.”

Matt Brittin, chief executive officer of Google UK, insisted it would be “very hard” for the internet giant to pay more tax here under present rules because the firm’s profitable activity was mainly US-based.

He was commended for telling the committee that Google chose Ireland and Bermuda as main bases because taxation rates were favourable.

But Mrs Hodge told him: “We are not accusing you of being illegal, we are accusing you of being immoral.”

Amazon is braced for a second grilling after public policy director Andrew Cecil was attacked by the committee for failing properly to answer its questions.

An incredulous Mrs Hodge accused him of feigning ignorance and said she would command the online retailer, whose profits are taxed in Luxembourg, to send another executive.

“Your entire activity is here yet you pay no tax here and that really riles us, it riles us,” she told him, accusing the firm of putting local bookshops out of business by playing the system.

Speaking to the BBC, she added: “I know that the book I buy doesn’t ever get to Luxembourg, where Amazon have their headquarters.

“But is bought here, housed in a warehouse here, posted to me through Royal Mail to my home.

“The ability of global companies to choose where they put their costs and their profits gives an unfair tax advantage which damages UK-based businesses.”

Campaign group UK Uncut has said it will target Starbucks coffee shops for direct action on Saturday December 8, saying the extra tax could be used to prevent cuts in public services.

Activist Sarah Greene said: “The Government could easily bring in billions that could fund vital services by clamping down on tax dodging, but are instead making cuts that are forcing women to choose between motherhood and work, and trapping them in abusive relationships.”